Statistics Canada reports August retail sales up 0.4% at $66.6 billion

Canadian retail sales rose 0.4% to $66.6 billion in August, helped by higher new car sales, Statistics Canada said Friday (Oct. 25).

However, core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—fell 0.4% in August.

"The details of the August retail sales report were softer than the headline increase, especially after accounting for the support from autos," Bank of Montreal economist Shelly Kaushik wrote in a report.

"Consumer spending continues to lag well behind population growth; with the latter looking to cool to around zero in the coming years, we’ll see if spending can recover from the combination of low inflation and falling interest rates."

Statistics Canada said retail sales were up in four of nine subsectors as sales at motor vehicle and parts dealers rose 3.5%, boosted by a 4.3% increase at new car dealers and a 2.1% gain at used car dealers.

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Gasoline stations and fuel vendors saw a 2.7% decline for the month.

The retail sales report followed a decision by the Bank of Canada to cut its policy interest rate by half a percentage point to 3.75% on Wednesday.

In cutting the benchmark rate, the central bank said household spending and business investment have picked up this year, but remain soft.

Sales at food and beverage retailers dropped 1.5% in August, as supermarkets and other grocery retailers fell 1.9% and convenience retailers and vending machine operators lost 0.6%.

Furniture, home furnishings, electronics and appliances retailers fell 1.4% as furniture retails slipped 3.2%.

In volume terms, retail sales increased 0.7% in August.

Looking ahead, Statistics Canada said its advance estimate of retail sales for September points to a gain of 0.4% for the month, though it cautioned the figure would be revised.

TD Bank economist Maria Solovieva said that outside of vehicles, retail sales were the weakest in three months. 

"Alongside the weakness in core sales, the downward trend in retail spending per capita remains intact, marking a major area of concern for the Bank of Canada, which moved to cut rates by 50 basis points this week," Solovieva wrote in a report.