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GM workers use human assistance automation to weld vehicle doors at the General Motors assembly plant.Nathan Denette/The Canadian Press

Canadian retail trade is set to rise in October after doing better than expected in September, when weak auto sales were partly offset by strength in the food and drink sector, Statistics Canada data indicated on Friday.

In a flash estimate, Statscan forecast that retail sales would increase by 1.0 per cent in October after falling by 0.6 per cent in September as a global chip shortage hit the auto sector. Analysts had predicted a 1.7 per cent drop in September.

“It’s important to note that the weakness in autos isn’t due to weakness in demand, but rather a lack of supply due to semiconductor shortages. … The picture looks much healthier than the headline suggests,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.

“Consumers appear ready, willing, and able to spend as we head into the holiday season,” he said in a note to clients.

Supply chain challenges pulled down overall trade at motor vehicle and parts dealers by 1.6 per cent in September. Sales of new cars fell by 2.8 per cent.

Sales decreased in seven of 11 subsectors, representing 63.5 per cent of retail trade. In volume terms, sales dipped by 1.1 per cent.

But sales in food and beverage stores and the furniture subsectors both rose by 1.3 per cent.

“While increased spending on services and the restricted supply of some goods, which is pushing prices higher, could make for a bumpy road this winter, it seems like retailing is holding up better than expected for now,” said Royce Mendes, senior economist at CIBC Capital Markets.

The Canadian dollar reversed some of its losses after the retail data, but was trading down at 1.2638 per U.S. dollar, or 79.13 U.S. cents.

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