New cars drag down Canada retail sales in July

OTTAWA: Canadian retail sales fell by 0.6 percent in July from June after three consecutive gains, dragged down by weaker sales at new car dealerships, Statistics Canada said on Thursday.

The decline was steeper than the 0.3 percent drop analysts had expected. Statscan revised June's advance to 0.8 percent from the previously reported 0.7 percent gain.

"Consumer spending is clearly cooling down a little bit,which is not surprising given what we've seen with consumer confidence since the spring," said Robert Kavcic, an economist at BMO Capital Markets.

Sales totaled C$37.5 billion ($38.6 billion), still above the pre-recession peak in late 2008, and Kavcic said the sharp decline in retail sales has been offset by strength in a few other sectors in July, buoying economic growth for the month.

"As far as July for real GDP, even though volumes were down almost 1 percent, if you look at other indicators -- housing, manufacturing, wholesale -- we're still probably going to see monthly GDP growth of around 0.2 or 0.3 percent, and that puts Q3 probably on pace for 2 percent growth or so."

Canada's economy contracted in the second quarter, but economists expect activity to rebound in the third quarter.

Sales at new car dealerships fell 3.5 percent. Used car sales fell 2 percent while sales of auto parts, accessories and tires slipped 0.4 percent, together offsetting a 2.3 percent increase in recreational vehicles.

Sales at gasoline stations, which were down in June for the second time in 12 months, remained unchanged in July.

Retail sales excluding motor vehicles were flat for the second consecutive month versus market expectations for a 0.2 percent increase.

Sales were down in seven of 11 sectors, accounting for 56 percent of the total, and in volume terms sales were off by 0.9 percent.

In the 12 months to July, sales were up by 3.9 percent compared with 4.6 percent in June.

Copyright Reuters, 2011