Rise in Canadian Retail Sales Driven by Price Increases
Canadian retail sales pressed ahead in February rising 0.2% increase in retail sales. Forecasters were looking for a 0.3% dip in sales. However, the rise reflected increasing prices; the volume of sales slipped 0.3%. Excluding the automotive sector, sales rose 0.6%, three times market forecasts.
The rise in the value of sales activity reflected increases in five of the eight retail sectors. Sales of building and outdoor home supplies, food and automotive products and at gasoline service stations rose. Higher gas prices propped up sales at service stations. Moderating the monthly increase were lower sales of furniture and electronics, which continued to fall with February's 1.9%, marking the seventh consecutive decline.
Economic data for February was generally soft, although the manufacturing report showed the volume of manufacturing sales jumping by a strong 2.6% in the month and the pace of decline in many sectors of the economy decelerated from the rapid decreases reported in January. We still expect that the economy contracted in February, although it is likely that the pace of decline slowed after a run of -0.7% to -1% monthly drops between November and January.
Even if the economy's pace of decline moderated, as we expect, in February, the very weak showing in late 2008 and January 2009 sets up for real GDP to fall at a strong pace in the first quarter. We see significant downside risks to our current forecast for a -4.4% annualized decline. Our current monitoring of the economy based on recently reported data points to a 6% annualized drop in the quarter.
Eyes on the Bank of Canada's Monetary Policy Report later this morning
We will see the Bank of Canada's updated quarterly forecast later this morning. Their statement earlier this week showed a significant downward revision to their forecast for the economy this year, with real GDP expected to drop by 3% and a 2.5% increase penciled in for 2010. RBC's monitoring of the economy points to a more moderate decline in 2009 of about 2%, with the economy expected to post positive growth rates later in the year as the impact of the extraordinarily accommodative monetary policy and fiscal stimulus takes hold.
RBC Financial Group
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The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
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