Canadian retail sales likely rose sharply in August after a solid July gain, indicating a strong rebound after two consecutive quarters of shrinking sales.

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August’s 0.5 per cent rise, based on an advance estimate from Statistics Canada released Friday, is just the third monthly sales gain this year. That follows a 0.9 per cent boost the previous month, which beat expectations for a 0.6 per cent rise in a Bloomberg survey of economists.

Overall, retail sales are tracking a 0.8 per cent rise in the third quarter, assuming flat growth in September. That follows a 0.4 per cent decline in the second quarter and a 0.5 per cent drop in the first quarter — the weakest two consecutive quarters since 2009 outside the pandemic.

The report sends a more upbeat signal about the strength of the Canadian economy than the latest gross domestic product data, which pointed to stalling growth in June and July. The data may give central bank officials more confidence that they can tame inflation without steering the economy into a recession.

Sales rose in seven of nine subsectors in July, led by increases at motor vehicles and parts dealers. Despite high volatility this year, car sales have generally been a source of strong receipts the last few years as Canada recovered from the pandemic, bolstered by pent-up demand and a booming population.

Excluding autos, receipts rose 0.4 per cent in July, narrowly beating expectations for a 0.3 per cent rise.

In volume terms, sales rose one per cent. Core retail sales, which exclude gas stations and car dealers, rose 0.6 per cent.

Sales volumes rose on a per capita basis for the first time since December, Charles St-Arnaud, chief economist at Alberta Central, said in an email. He noted that declining spending per person indicates the economy would be in a recession if not for strong population growth.

“While better consumer spending will support growth in the third quarter, it is unlikely to have a big impact on the Bank of Canada’s thinking, as it remains unclear whether it will be sustained,” St-Arnaud said.

Auto sales recovered after an operational disruption caused by a hacking group in June, pointed out Maria Solovieva, economist at Toronto-Dominion Bank, in a report to investors.

“This was enough to bring the three-month average auto sales growth into positive territory for the first time since January. The rest of the categories also told an encouraging story as growth in core sales accelerated on the month, likely driven by strong population,” she said.

August’s preliminary estimate is based on a response rate of 52 per cent. Typically, 89 per cent of companies respond to the final survey.

Bloomberg.com