By Kevin Carmichael
Ottawa, (Bloomberg) -- Canadian retail sales rose 1.7 percent in October, more than double the pace economists were expecting, as consumers made winter-clothes purchases they'd postponed and bought a record number of cars and trucks.
Retailers sold goods worth C$26 billion ($17 billion), up from a revised C$25.6 billion the previous month, Statistics Canada said. Economists surveyed by Bloomberg News forecast a 0.7 percent increase, the median of 11 estimates.
The report adds to signs that Canada's economy was picking up speed as it headed into the fourth quarter and increases the likelihood that the Bank of Canada will raise interest rates by the end of the first half of next year, economists said. They expect the government to report tomorrow that the economy grew 0.2 percent in October, up from 0.1 percent in September.
``The one thing the bank has kept steady in its projections is that the domestic economy is strong, and this will solidify their expectation,'' said Jonathan Basile, an economist at Credit Suisse First Boston in New York.
The central bank has said it will need to rein in the economy with higher interest rates as soon as worldwide demand recovers and the U.S. decides whether to go to war against Iraq.
Canada's dollar rose after the report, trading as high as 64.59 U.S. cents from 64.46 cents yesterday, before dropping to 64.44 cents at 4:34 p.m. Toronto time. The 5.25 percent coupon bond maturing in 2012 fell 7 cents to C$102.44, increasing its yield to 4.92 percent.
Across the Board
In October, sales rose in all seven of the categories that StatsCan measures for retail sales and increased 6.8 percent from the year-ago month. Consumers are getting a boost from interest rates that are 0.75 percentage point above a four-decade low and economic growth that has produced 502,600 jobs so far this year, economists said.
Clothing stores led the increase, posting a 5.1 percent increase in sales that was the second-biggest jump in nine years after June's 5.9 percent surge. That sparked the first gain at general merchandise stores in four months.
Consumers delayed purchases of items such as winter boots, lined coats and gloves because of unseasonably warm weather in September, catching up as temperatures turned chillier in October, StatsCan said.
The trend may continue through the end of the month, said Normand Nowlan, executive vice-president operations at Saan Stores, the chain of 240 family clothing stores owned by Winnipeg, Manitoba-based Gendis Inc. Temperatures remained well above freezing in many parts of the country through last week, prompting Saan to increase its advertising budget in November to get more shoppers interested in winter gear, Nowlan said.
``For people selling apparel in Canada, winter didn't show up until just last week,'' Nowlan said from Winnipeg. ``Sales of winter-related clothing started well, but December has been tough.''
Car and truck sales rose 2.3 percent to 148,626 units, the most in any October on record, as buyers flocked to showrooms for the new 2003 models and to take advantage of financing incentives.