* Retail sales down 0.5 percent on month
* Analysts had expected 0.3 percent increase
* Data confirms second quarter off to weak start
* Canadian dollar falls after data released
By David Ljunggren
OTTAWA, June 21 Canadian retail sales dropped
0.5 percent in April from the previous month, defying
expectations of an increase, in another sign that the economy
grew at a disappointing rate in the second quarter.
The overall decline, reported by Statistics Canada on
Thursday, was the greatest since the 0.5 percent retreat in July
2011. Analysts had forecast a 0.3 percent month-on-month
Lower sales were reported in eight of 11 subsectors,
representing 78 percent of retail sales.
"It looks like GDP for April is coming in at a modest 0.1
percent, or flattish. In other words, the economy struggled to
post any growth in April," said Jennifer Lee of BMO Capital
In April, the Bank of Canada forecast annualized growth in
both the first and second quarters of 2.5 percent. The actual
figure for the first quarter was 1.9 percent.
Data released last week showed April manufacturing fell by
0.8 percent, compared with expectations for a 0.3 percent rise.
On June 5, the central bank signaled it might have to raise
interest rates but softened its recent hawkish language as fears
about the impact of the European debt crisis intensified.
The Bank of Canada has kept its benchmark rate at a
near-record low 1 percent since September 2010.
"Overall, today's data point to a softening trend in the
consumer (is) one more reason for the Bank of Canada to stay on
the sidelines," said Emanuella Enenajor of CIBC World Market
Bank of Canada Governor Mark Carney is due to give a speech
and talk to reporters later on Thursday.
Canada's dollar weakened against its U.S. counterpart after
the retail figures were released, dropping to C$1.0218 versus
the U.S. dollar, or 97.87 U.S. cents, from about C$1.0195, or
98.09 U.S. cents, just before the data's release.
It later recovered partially, and by 9:30 a.m. (1330 GMT) it
was trading at 1.0201, or 98.03 U.S. cents.
Compared with April 2011, retail sales were 3.4 percent
higher. In volume terms, April sales decreased by 0.8 percent
from March, the third decline in four months.
"The consumer is so far tracking even weaker in the second
quarter than it did in the first quarter, and that supports our
longstanding bias that the Bank of Canada has no rate tightening
flexibility any time soon," Scotia Capital economists Derek Holt
and Dov Zigler said in a research note.
Statscan said sales at motor vehicles and parts dealers fell
by 1.2 percent, while lower receipts in some stores reflected
the fact that spring sales this year started in March.
Enenajor said "other categories were notably weak as well,
including furniture sales, food sales, electronics, vehicle
sales and merchandise store sales, alluding to consumer weakness
beyond a simple 'weather' story."
A Reuters poll of global forecasters on May 30 showed the
median prediction for the timing of the Bank of Canada's next
25-basis-point rate increase had moved ahead to the first
quarter of 2013 from the second quarter.