By Promit Mukherjee
OTTAWA (Reuters) -Canada's retail sales in October were marginally lower than expected as a jump in new car sales offset consumers' reduced purchases at supermarkets, grocery stores and wine shops, data showed on Friday.
Retail sales, which comprise motor vehicles, clothing, furniture, food and beverages and others, grew by 0.6% in October, Statistics Canada said, adding that sales rose in five of nine subsectors.
November's retail numbers, based on surveys of only half of the respondents for a preliminary estimate, showed sales were likely flat, Statscan said.
Retail sales are considered an early indicator of Gross Domestic Product growth and contribute almost 40% to total consumer spending, which was primarily responsible for keeping Canada's economy growing in the third quarter.
Canada's economy grew at an annualized rate of just 1% in the third quarter, less than Bank of Canada's prediction, and early indicators have shown GDP in the fourth quarter is also likely to fall below the central bank's 2% expectation.
The October GDP numbers will be released next week.
Analysts had forecast 0.7% growth in sales for October and had estimated sales excluding automotive and parts to be at 0.5%.
Excluding the automotive subsector, which accounts for over a quarter of the total retail trade, sales rose only 0.1%.
The marginal increase in October retail sales took them to C$67.58 billion ($46.97 billion) in value, but they were unchanged in volume terms.
"Following some signs of strength in retail sales in the previous few months, retail spending looks to have stalled to kick off the fourth quarter," Shelly Kaushik, an economist at BMO (TSX:BMO) Capital Markets wrote in a note.
Economists said that a likely flat November sales could also be due to a two-month sales tax holiday from mid December which could have prompted customers to hold back on purchases and should not be seen as a declining trend.
The Canadian dollar was largely unchanged in early trading, up only 0.06%, or 69.5 U.S. cents, at 1.4389 against the U.S. dollar.
Sales of motor vehicles and parts, which are often volatile, rose by 2% led by new car sales which saw a 2.5% jump. Sales of food and beverages, the second biggest contributor to retail trade with a fifth of the share, dropped by 0.7% as supermarket sales fell.
($1 = 1.4389 Canadian dollars)