Retail sales increased 0.3% in May to $26.2 billion, Statistics Canada reported Monday. That’s the first sales gain in three months.

Sales had fallen 0.8% in April and 0.7% in March. Previously, retailers had generally experienced rising sales since the September 2001 slump.

Economists said May’s numbers disappointed on the headline, but there was some positive news in the details.

CIBC World Markets says, “What looks to have been a relatively weak month for goods retailers hid the first steps of recovery from SARS-depressed levels of activity.” It notes that, after controlling for the impact of falling prices, real retail sales posted a 0.7% increase. CIBC also says that May’s weakness was narrowly focused, with many key categories churning out solid gains.

“Overall, this report carries mixed messages,” concludes RBC Financial. “Though total retail sales posted their first gain in three months, the magnitude of the increase was well below expectations for a stronger snapback after the steep declines over the previous two months. What was most encouraging about this report, however, was that Ontario posted a healthy gain that compensated for a small part of the very sharp declines over March and April the reflected the effects of SARS and the war in Iraq on the retail sector.”

TD takes a slightly dimmer view of the numbers, noting that they are not big enough to offset prior sales drops. “Today’s retail report does not bode particularly well for overall consumer spending in the second quarter of 2003,” it says.

TD concludes, “Today’s figures, along with last week’s batch of manufacturing and trade data, provide credence to the Bank of Canada’s decision to trim interest rates on July 15th. Not only that — the data call out for more interest-rate relief on September 3rd,” it says.