07/23/2013 08:55 EDT | Updated 09/22/2013 05:12 EDT

Retail sales grow at fastest pace in 3 years

Retail sales expanded by 1.9 per cent to $40.4 billion in May, the fastest pace of growth since March 2010 and more than twice what economists were expecting.

Nine of the 11 subsectors that Statistics Canada tracks were higher, led by sales at motor vehicles and parts dealers.

Sales at food and beverage stores rose 1.1 per cent overall as sales of alcoholic beverages increased in sync with the delayed start to the National Hockey League playoffs, Statistics Canada said.

Sales were higher in every province. The largest gain in dollar terms occurred in Quebec, where sales increased 3.1 per cent and more than offset the declines of the previous two months.

BMO economist Benjamin Reitzes said the strong showing in May suggests the economy may do better in the second quarter than anticipated by the Bank of Canada in its latest forecast.

However, Reitzes said the June results could be affected by the Calgary flood and Quebec construction strike.

"The surprisingly strong gain in retail sales, coupled good readings for wholesale trade, housing starts and home sales, suggests that May real GDP growth could be as high as 0.4 per cent. That suggests there's some upside to our call for 1.4 per cent annualized growth in Q2 — the Bank of Canada's one per cent forecast looks quite light," Reitzes wrote in a commentary.