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BMO Financial Group

October 25, 2011 12:52 ET

Retail Sales Strong Despite Headwinds-BMO

Canadian Retailers Optimistic as Holiday Sales Period Approaches

TORONTO, ONTARIO--(Marketwire - Oct. 25, 2011) - The 0.5 per cent increase in Canadian retail sales for August – better than expected – is admirable given the headwinds of a volatile stock market and drop in consumer confidence, according to BMO Economics.

"Consumer spending growth held up relatively well in August despite a significant blow to consumer confidence; there are still supports from extremely low interest rates and a healthy job market," according to Robert Kavcic, Economist, BMO Capital Markets. "With all of the August data now in, the Canadian economy looks to have posted modest growth in the month, and should do so for all of Q3 as well."

Today's numbers support the findings of a BMO Economics report released last week, which stated that Canada's retailers should experience an increase in sales this holiday season despite concerns about a global recession. "Low interest rates, relatively low unemployment, and steadier gasoline and food costs will keep the Grinch away," said Sal Guatieri, Senior Economist, BMO Capital Markets. "While household debt remains high, not all households are overstretched."

The report states that low interest rates should keep Canada's economy moving forward – albeit slowly – and the jobless rate below long-run norms. "As global recession fears abate, consumer confidence will improve. Meantime, expected steadier gasoline prices and food costs should reduce inflation in coming months, lifting real wages," said Mr. Guatieri.

"Despite a great deal of uncertainty in the global economy, Canadian retailers are cautiously optimistic as we approach the holiday sales period," said Cathy Pin, Vice-President, Commercial Banking, BMO Bank of Montreal. "Retailers in this country have a remarkable ability to adapt and have shown their resiliency. Over the past year many have capitalized on the appreciation of the Canadian dollar, and taken advantage of opportunities to diversify their business and suppliers, and have broadened their customer base."

The full retail sales report and today's analysis of Canada's retail sales numbers for August can be found at bmocm.com/economics.

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