Sales of new cars and trucks help drive retail up one per cent in May

OTTAWA – Shoppers buying new cars and trucks helped boost retail sales in May by 1.0 per cent to $43 billion in Canada, the third increase in four months, Statistics Canada said Thursday.

The rise in retail sales was better than the 0.5 per cent increase that had been expected by economists, according to Thomson Reuters.

“While not a big upside surprise, the mildly encouraging retail results break a run of sour news for the Canadian economy,” BMO chief economist Doug Porter wrote in a commentary.

“The decent result also plays up the fact that the consumer is still doing its job — now the economy needs some serious help from non-resource exports.”

Retail sales were up in nine of 11 subsectors, representing 92 per cent of retail trade.

In volume terms, Statistics Canada says sales were up 0.4 per cent after removing the effects of price changes.

Sales at motor vehicle and parts dealers rose 1.3 per cent, boosted by a 2.0 per cent increase at new car dealers. Used car dealers reported a 1.2 per cent drop in sales. Sales at gasoline stations increased 1.9 per cent.

Electronics and appliance sales were up 6.1 per cent in May.

Sales at sporting goods, hobby, book and music stores fell 1.8 per cent, while clothing and clothing accessories stores saw their sales drop 0.5 per cent.

Concerns about the economy increased in recent months amid speculation about whether or not the country slipped into recession in the first six months of the year.

The economy contracted in the first quarter at an annual pace of 0.6 per cent and some economists, including the Bank of Canada, have suggested it also pulled back in the second quarter.

In an effort to give the economy a boost last week, the central bank cut its key interest rate by a quarter of a percentage point to 0.5 per cent. The move was followed by the big banks reducing their prime lending rates by 0.15 of a percentage point to 2.70 per cent.

Retail sales were up in nine provinces in May with Ontario, Nova Scotia and, to a lesser extent, British Columbia accounting for most of the increase.

Saskatchewan was the lone province to post weaker sales in May, edging down 0.1 per cent.