Canada – Retail sales fell 0.1% in August, disappointing consensus which was looking for an increase of 0.3%. The prior month was revised down to -0.2% (from -0.1%). In August, sales declined in 7 of the 11 subsectors, including autos. Excluding autos, sales were flat also disappointing consensus which had expected an increase of 0.3%. There were lower revenues for sellers of clothing, electronics, building materials, sporting goods, general merchandise and miscellaneous items. Those more than offset gains for sellers of furniture/home furnishings, food/beverage, health care products and gasoline. The latter’s gains happened despite falling pump prices during the month. In real terms, Canada’s retail sales fell 0.3% in August. Assuming no change in September, real retail sales fell 1.1% annualized in Q3, which suggests consumption spending remained soft in the third quarter.
The consumer price index rose 0.1% in September, allowing the year on year inflation rate to increase two ticks to 1.3%. This was lower than consensus expectations calling for a 0.2% rise. In seasonally adjusted terms, CPI was up 0.2% as higher prices for recreation, alcohol/tobacco, clothing and transportation have more than offset declines in food, household operations and healthcare. The core CPI, which excludes eight of the most volatile items, rose 0.2% (in line with consensus expectations), which allowed the year-on-year core inflation rate to remain unchanged at 1.8%.
In August, manufacturing shipments rose 0.9%, well above the 0.3% increase expected by consensus. The July figure was revised downwardly from a 0.1% gain to a flat print. Shipments were up in 15 of the 21 broad industries. Among the six industries that registered a decline, transportation was hurt by lower sales of autos (-2.2%) and aerospace products. Inventories shrank 0.5% after growing 0.8% the previous month. The inventory-to-sales ratio slid from 1.41 to 1.39. In real terms, sales advanced a solid 1.2%. The Canadian factory data surpassed expectations. The volume gains bode well for August GDP, although the inventory drawdown will take some shine off the contribution of factories in the month. Things are looking good for the quarter as well because, even if sales proved flat in September, real factory shipments were on track to expand a hefty 3.6% annualized in Q3 after contracting the prior quarter. The factory revival has much to do with the export rebound observed during the quarter. All in all, results support the notion that Canada’s Q3 GDP growth will peg in above 3% annualized.
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