Ten of 11 sectors fall as retail sales drop 2 per cent in April: StatsCan

OTTAWA - Canadian shoppers were a lot less active in April than expected, resulting in a broad-based and steep drop in retail sales across the country that economists described as a slowdown from the rapid growth experienced earlier this year.

OTTAWA - Canadian shoppers were a lot less active in April than expected, resulting in a broad-based and steep drop in retail sales across the country that economists described as a slowdown from the rapid growth experienced earlier this year.

Statistics Canada says retail sales decreased two per cent in current dollars to $36.2 billion in April after a gain of 2.2 per cent in March.

The drop was several times bigger than projected by economists ahead of the Statistics Canada report.

"Some pullback from the weather-juiced March result was expected, but the decline was much deeper than forecast," BMO Capital economist Douglas Porter wrote in a commentary.

He attributed the decline primarily to reduced sales volumes, which fell by 1.9 per cent after a 2.3 per cent spike in March.

TD Economics saw the numbers somewhat differently, though, saying lower prices for gasoline were also a factor — although it agreed that the retail numbers were affected by lower sales volumes.

"In addition to a price-induced decline in gasoline store sales, a major pull-back in sales at motor vehicle and parts dealers (-4.8%) was the greatest culprit behind the sales drop in April. Excluding these two auto-related areas, retail spending fell a more muted 1% compared to March," TD economist Derek Burleton wrote.

Both economists said April's numbers weren't a major concern but likely signalled a somewhat slower pace of growth for the Canadian economy compared with the robust first quarter of 2010 and fourth quarter of 2009..

"Even with the deep dive in April, real retail sales are still up 4.7 per cent from year-ago levels. However, the chunky decline in sales volumes, combined with soggy manufacturing sales and a drop in existing home sales point to a flat result for April’s real GDP report (due next Wednesday)," Porter said.

Burleton said April’s retail data suggest that growth in consumer spending likely moderated in the second quarter, which ends June 30, after an "oversized gain" of 4.4 per cent in the first quarter.

TD remaims confident the economy expanded by a strong 3.5 to four per cent in the second quarter as a whole but said prospects for the consumer-oriented retail sector are less bright for the second half of 2010.

"As perhaps signalled in today’s release, the race to beat out low interest rates earlier this year has probably brought sales forward from the future and sapped pent-up demand," Burleton wrote.

"With many consumers now facing heavy debt-loads — amounting to almost 150 per cent of their after-tax incomes on average — and with interest rates on a gradual upward path, household purse strings will likely be tightened."

Statistics Canada said 10 of 11 retail subsectors and in all provinces showed declines in April.

The only subsector to register a gain was electronics and appliance stores, where sales increased 0.6 per cent.

Among the notable declines was a 5.3 per cent drop for new-car dealers and a 5.2 per cent decline in sales at clothing and clothing accessories stores.

The agency also reported a 4.8 per cent decline at motor vehicle and parts dealers and lower sales at other motor vehicle dealers (down 6.8 per cent) and used car dealers (down 4.4).

Sales at automotive parts, accessories and tire stores were up 2.3 per cent, their third straight monthly increase, while sales at gasoline stations were down two per cent after 11 straight increases.

Sales at building material and garden equipment and supplies dealers decreased two per cent and food and beverage stores sales fell 0.5.

Retail sales declined for a third consecutive month at furniture and home furnishing stores, edging down 0.3 per cent.

 
 
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