Vehicles sit on display at a Chevrolet, Buick and GMC dealership as a sale banner flutters in the wind in Hamilton, Ontario, Canada, January 28, 2025. REUTERS/Carlos Osorio

By Promit Mukherjee

OTTAWA (Reuters) -Canada's retail sales rebounded in August as consumers spent more on new cars, at supermarkets and for clothing, data from Canada's national statistics agency showed on Thursday.

Retail sales grew by 1% to C$70.40 billion ($50.20 billion) in August from an upwardly revised drop of 0.7% in July, Statistics Canada said.

An advance estimate for September showed that sales are likely to fall by 0.7%.

Analysts polled by Reuters had forecast retail sales growth of 1% in August and 1.3% growth excluding automotive and parts sales.

Excluding the automotive category, which accounts for up to 28% of the total retail sales, sales grew by 0.7%, StatsCan data showed.

In volume terms, the monthly retail sales also clocked a similar 1% gain, it said.

Retail sales, which include domestic sales of cars, furniture, food, gasoline, are considered an early indicator of gross domestic product growth and contribute around 40% to total consumer spending.

Analysts and economists track the retail sales number closely to gauge the health and consumption pattern of the economy.

Retail sales have seesawed since President Donald Trump imposed a barrage of tariffs on Canada in March, reflecting consumer.

"The solid rebound in retail sales in August will not do much to spare the economy from a sharp slowdown in consumption growth in the third quarter given the similar-sized fall in sales expected in September," Bradley Saunders, North America Economist at Capital Economics wrote in a note.

Robust August data will not be enough to sway the Bank of Canada from a rate cut next week, he said.

Bank of Canada will announce its rates decision on October 29 and money market bets show almost an 87% chance of a 25 basis point cut.

The biggest boost to retail sales in August came from the automotive sub-sector. Another sub-sector which posted solid growth was clothing and accessories.

Sales at fuel stations and sales of building materials registered a drop.

($1 = 1.4024 Canadian dollars)

(Editing by Joe Bavier and Nick Zieminski)