09:00 AM EDT, 09/20/2024 (MT Newswires) -- August's headline retail sales rose 0.9% during the month, besting estimates from economists and the flash estimate from Statistics Canada, said Desjardins.

The strength in Friday's headline figure was driven by a rebound in motor vehicle sales following a widespread software outage at dealerships in June. That said, excluding autos and gasoline, sales still rose a strong 0.6% month over month, led by gains at grocery stores and general merchandise.

In total, spending increased in seven out of nine categories and volumes rose in six out of nine categories. In volume terms, retail sales rose 1%.

Desjardins recalls that this strength has to be taken in the context of surging population growth in July according to the Labour Force Survey and comes after a long period of stagnation.

Statistics Canada's flash estimate noted that the strength in retail sales continued in August, rising by 0.5% month over month. Goods prices were flat in August, so most of this increase is likely attributable to volumes.

The recent tick-up in retail sales coincides with the Bank of Canada's first two rate cuts. At the margin, this reduces the likelihood of the Desjardins forecasted 50 basis point move in October, but the bank's gross domestic product tracking remains well below the BoC's Q3 estimate and there is still a considerable amount of data to be released before the rate decision in October.

With GDP likely to disappoint Canada's central bank, markets aren't reacting much to the stronger data, added Desjardins.