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March retail sales likely slower as loonie sags, debt drags

Many observers expect Statistics Canada to report Wednesday that retail sales across the country rose by 0.2 per cent in March, though some expect to see a decline of 0.2 per cent.

Glenn Lowson/The Globe and Mail

Economists wonder whether the sagging loonie might keep some cross-border shoppers at home for a while, giving Canada's retailers a boost in the process.

Many observers expect Statistics Canada to report Wednesday that retail sales across the country rose by 0.2 per cent in March, though some expect to see a decline of 0.2 per cent.

Either way, the reading would lag February's increase of 0.8 per cent. Part of that would be because, in dollar terms, sales would have been hit by a decline in gasoline prices. And auto sales are believed to have been flat.

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Excluding gas and autos, the sales report should be better.

"The forecasted retrenchment is due in large part to expected weakness in general merchandise stores that have posted outsized gains in each of the last two months," said economists at Toronto-Dominion Bank.

An increase, if there is one, would mark the sixth over seven months.

"The tiny headline gain will slow annual sales growth to slightly above 1 per cent, well shy of the 3-per-cent U.S. pace," said senior economist Benjamin Reitzes, who projects an increase of 0.3 per cent once gas and autos are factored out.

"Perhaps with the loonie weakening of late, retailers will benefit as the allure of cross-border shopping fades, though high debt levels will likely continue acting as a restraint on household spending."

In fact, fewer Canadian shoppers appear to have crossed the border in March. According to Statistics Canada Friday, same-day car trips from Canada to the United States, the best measure for cross-border shopping, fell by 1.3 per cent in March.

Add to that the fact that the Canadian dollar has tumbled over the past week.

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"Retailing has had a good run in the last two months – a bit puzzling to some observers given Canada's slowing and debt-laden consumers," said Emanuella Enenajor of CIBC World Markets.

"But spending recently got a lift from a few temporary factors: January-February sales bounced back after a weak holiday shopping season, egged on further by a recovery in department store sales, helped by new store openings. But the momentum likely slowed in March as those temporary factors faded."

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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