TORONTO, Aug 21 (Reuters) - Canadian retail sales rose in June for the second straight month as cash registers in the food and clothing sectors were kept busy, but auto sales sagged, Statistics Canada said on Thursday.
The 0.3 percent rise in retail sales from May came as a surprise to market analysts, who had expected June sales to fall by 0.7 percent, according to a Reuters poll. May's month-on-month gain was revised upwards to 0.5 percent.
"Today's report suggests firm underlying consumer demand in Canada, as indeed has generally been the case over the past year," David Wolf, senior economist at RBC Capital Markets, wrote in a research report.
"The central bank will be encouraged by today's figures, but the powerful disinflationary trend of recent months has likely raised the bar even higher in terms of the growth tone needed to prevent further cuts."
Despite back-to-back monthly gains, retailers have not recouped lost sales from March and April. Statscan said retail sales were now just below where they had been in February, before consumer spending slid sharply amid a SARS outbreak in the Toronto area.
Flagging sales of autos and recreational vehicles, which posted a 1.1 percent decline, put a brake on overall spending as all other sectors posted higher June numbers. Excluding autos, overall June retail sales rose 1.2 percent.
Sales in the food sector rose 1.9 percent as grocery store sales continued to bob and weave this year while consumers avoided restaurants amid the SARS scare.
The category "other retail", which includes stores like liquor, sporting goods and jewellery, also rose 1.9 percent. A 1 percent rise in clothing sales rounded out the top three sectors in June.
June retail sales were 2.7 percent higher than those in June 2002, while sales were off 0.2 percent in the second quarter from the first quarter.
($1=$1.41 Canadian)