Canadian retail sales fell by 0.3% in August to $35.9 billion, Statistics Canada reported today. It was the third decrease in four months.

Lower sales in the automotive sector more than offset higher sales in five of the seven other sectors of the retail trade industry.

Excluding the entire automotive sector, retail sales in the other seven sectors combined rose by 0.4%.

“On the whole, price changes had little effect as retail sales in volume terms also declined by 0.3% in August,” StatsCan said.

Much of the 1.8% sales decline reported by the automotive sector in August was largely attributable to a 3.7% drop in sales at gasoline stations.

Sales by gasoline stations fell for the first time since September 2007. During that period of strong price-influenced increases, sales at gasoline stations rose by 27.0%.

New car dealers saw their sales fall for a seventh consecutive month.

Meanwhile, used and recreational motor vehicle and parts dealers saw robust sales in August, the third increase in four months.

Sales at clothing and accessories stores (-0.9%) declined for a second consecutive month in August.

Of the five sectors that registered sales increases in August, the two highest were in the general merchandise stores and the food and beverage stores sectors.

Sales of building and outdoor home supplies rose for a fourth consecutive month despite the cooler real estate market. Such sales growth is unlikely to last, according to CIBC World Markets economist Krishen Rangasamy: “this is a discretionary item for the consumer and we do not expect those gains to be sustained in an environment of anemic growth.”

British Columbia posted the largest decline in retail sales among the provinces, falling 0.9% in August.

Retailers in Quebec and New Brunswick posted lower sales after four consecutive monthly increases.

Sales changed very little in the other provinces in August.

Consumer spending isn’t likely to improve any time soon, according to BMO Capital Markets economist Benjamin Reitzes. “The outlook for consumer spending isn’t promising. Canadian domestic demand is clearly slowing, reinforcing the Bank’s decision to cut rates yesterday, and signalling more easing to come,” he wrote in a note.

Leading indicators slip

Separately, StatsCan reported that the composite leading index dipped 0.2% in September, after a 0.3% gain in August capped a string of five consecutive increases.

“Most of the reversal originated in a sharp drop in the stock market; excluding it, the composite index would have been unchanged,” StatsCan said.

Overall, five of the nine other components retreated, while one was unchanged.

The smoothed version of the Toronto stock market fell by 3.1%, its first decline since March due to a 14.7% drop in the unsmoothed version.

The leading indicator for the United States fell for the 13th straight month, dating back to the onset of the global credit crisis in August 2007.

The outlook for a continued recovery of Canada’s manufacturing sector was marred by weaker U.S. demand. New orders contracted 2.1% after two months of growth, led by lower demand for capital goods other than aerospace products.

The buoyancy of household demand earlier in the year faded over the summer, StatsCan said.

While demand continued to grow for furniture and appliances, spending on other durable goods fell 0.3% for the second straight month. It had risen by over 1% a month early in 2008, just after the Goods and Services Tax was cut.

The housing index edged down for the fourth straight month, as slower sales of existing homes outweighed a rebound in housing starts.

Services employment remained buoyed by the personal sector. While jobs expanded rapidly in September, total employment edged down 0.1% in the third quarter.

IE