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New car purchases boost retail sales, but economists warn of Omicron pullback

A new vehicle for sale is seen at an auto mall in Ottawa, on Monday, April 26, 2021. THE CANADIAN PRESS/Justin Tang

Canadian retail sales were up 1.6 per cent to $57.6 billion in October as new car sales rebounded after two consecutive months of declines.

Statistics Canada said Friday the effect of the semiconductor chip shortage on the supply of motor vehicles was less pronounced in October than in previous months.

Sales at motor vehicle and parts dealers were up 2.2 per cent, led by a 2.8 per cent jump in new car sales, the agency said.

Statistics Canada also said its preliminary estimate for November pointed to an increase in retail sales of 1.2 per cent for the month, but it cautioned the figure would be revised.

Read more: Canadian small businesses struggle again amid COVID-19 capacity limits, CFIB says

“Canadian trade was moving into the fast lane in October and November, before Omicron likely applied the brakes in December,” Andrew Grantham, a senior economist with CIBC Capital Markets, said in a client note.

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The 1.6 per cent increase in retail sales in October beat estimates of one per cent, he noted, adding that Statistics Canada’s early estimate for November suggests retail and wholesale sales saw further impressive gains last month.

“Were it not for the rise of Omicron and retightening of some restrictions across the country, we would probably be having to upgrade our Q4 GDP forecast even further,” Grantham said in the CIBC Economic Flash. “As it is, something around 4.5 per cent may still be appropriate factoring in a modest December pullback.”

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Meanwhile, overall core retail sales _ which exclude gasoline stations and motor vehicle and parts dealers – increased 1.5 per cent, the agency said.

Sales climbed in seven of 11 subsectors in October, representing nearly 60 per cent of retail trade.

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One of the biggest increases was at sporting goods, hobby, book and music stores, which saw sales soar 17.5 per cent.

Read more: ‘Many unfortunately were pushed over the edge’: Pandemic leads to exodus of downtown retail tenants

Statistics Canada noted that the uptick in sales coincided with the continued resumption of many recreational and school-based sporting leagues in the fall.

Sales at general merchandise stores rose 2.8 per cent for a fifth consecutive month.

Building material and garden equipment and supplies dealers recorded a 3.2 per cent increase in sales.

Meanwhile, sales at food and beverage stores edged down 0.6 per cent, primarily due to weaker sales at supermarkets and other grocery stores.

Across Canada, retail sales were up in nine provinces in October, led by Ontario and Alberta. Quebec posted the lone provincial decline, with sales down 0.2 per cent in October.

In volume terms, retail sales were up 0.9 per cent in October.

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