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'Fireworks' in Canada’s economy as retail sales surge

Tags: Economy, Retail

Canadian retail sales rose far more than expected in January, boosted by motor vehicle purchases and a rebound in a number of sectors that slumped at the end of last year, data from Statistics Canada showed on Friday. And while regional divergence is still obvious, observers say the surge in consumer spending bodes well for the economy with just a few days to go before the federal budget.

Sales rose 2.1 per cent, topping analysts' expectations for a gain of 0.6 per cent. Excluding the auto sector, sales were up 1.2 per cent, while overall volumes gained 2.1 per cent. It was a sharp reversal after retail sales plunged 2.2 per cent in December.

“Aside from weakness in the oil patch, there appears to be some robust momentum heading into 2016,” wrote TD economist Michael Dolega in a note to clients.

Motor vehicle and parts dealers led the advance in January with a 4.8 per cent increase, the sector's third gain in four months, as sales at new car dealers rose.

Consumers cut back their spending in December in the midst of unseasonably warm weather, but five sectors bounced back in January from lower end-of-year sales. Sales at general merchandise stores jumped 4.9 per cent, while clothing purchases rose 1.2 per cent.

“Fireworks at the start of 2016,” CIBC economist Nick Exarhos declared in a report to clients.

“After a strong manufacturing report on Wednesday, today’s surge in real retail sales suggests that we’re set for a 0.4 per cent in gain in January GDP,” he added. “However, it will be hard to maintain the current blistering pace in retail sales without a turn for the better in the labour market and for aggregate Canadian incomes.”

Spending was up in eight of Canada's 10 provinces, including Ontario and Quebec. But sales in oil-sensitive Alberta slipped 0.2 per cent, the fourth decrease in five months, as higher new car sales were offset by lower sales at gasoline stations.

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