Retail sales down in September, but an improvement over 2016

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Canada's retail sector saw its sales edge up 0.1 per cent to $49.1 billion, boosted by increased sales at gasoline stations due to higher prices.

The slower pace of growth, along with muted inflation and uncertain North American trade policy, is expected to keep the Bank of Canada on hold when it meets next month after raising interest rates twice earlier this year.

On a year-over-year basis, nominal retail sales rose 6.2%. That's why today's retail sales report could be critical for the stance of the Bank of Canada. Statistics Canada reported Tuesday that wholesale sales fell 1.2 percent in September. For the third quarter, retail sales increased from the previous three-month period by 1.8% on an annualised basis.

The Canadian dollar fell as much as 0.2 percent to C$1.2723 per USA dollar after the retail report. Economic growth is expected to sharply slow in the July-to-September period after expanding 3.7% and 4.5% in the first and second quarters, respectively. Now, with September's retail figures in the books, economists anticipate growth closer to 1.5% with some possibility of downside risk, according to Benjamin Reitzes, economist at BMO Capital Markets.

For the second month in a row, gasoline sales rose in September, up 2.6%, due to supply disruptions as a result of Hurricane Harvey lifting prices at the pump. In volume terms, sales at gasoline stations declined 2.5 per cent.

A strong showing was also put in by retail stores selling home related products, with building material and garden equipment sales jumping 2.6%, and furniture purchases growing 2.3%.

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