- Krishen Rangasamy, senior economist at National Bank of Canada
Canada's retail sales surged to a record in May with gains across most categories led by new automobile dealerships. Nevertheless, the better-than-expected data might not sufficient to avoid a fifth negative monthly GDP figure. Canadian retail sales gained 1.0% to a record C$42.97 billion in the reported month, according to Statistics Canada. Economists had projected a modest 0.6% growth. Sales rose in nine of 11 major categories making up 92% of total receipts. After adjusting for price changes the volume of sales increased 0.4%. New car sales rose for a fourth consecutive month, surging 2% to C$8.6 billion. However, sales of used cars declined 1.2%. At the same time, core retail trade, which strips out automobile and parts sales due to their tendency to be volatile, rose 0.9%, beating analysts' expectations of an 0.8% increase.
Consumer spending remains the key driver of the world's 11th economy, where lower energy prices have undermined exports and business investment. The Bank of Canada cut interest rates for the second time this year on July 15 following signs output shrank in the first half. The central bank also downgraded its second quarter growth forecast from a positive 1.8% to a negative 0.5% and downgraded Q3 from 2.8% to 1.5%.
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