Stronger sales of new cars helped push overall retail activity in Canada up by 0.3% to $33.9 billion in March, Statistics Canada said Friday.

The March increase marked the third consecutive month that total sales have gone up.

StatsCan said that the gains seen from January to March have not completely offset declines reported in November and December. March’s retail sales are still more than 6% below the peak reached in September 2008.

Even with the gain in March, economists expect real consumer spending to show a contraction in the first quarter.

“While Canadian consumers have not been as hard hit as U.S. households, there remains underlying softness in today’s results,” said BMO Capital Markets economist Douglas Porter. He expects a dip in real consumer spending to contribute to an annualized decline in real GDP of nearly 7% in the first quarter.

Going forward, growth in retail sales will likely continue to be slow.

“The current recession has reminded Canadians of the virtues of frugality and, as a result, we can expect the savings rate to continue to rise over the coming months, which will limit consumption and therefore economic growth over the next few quarters,” said CIBC economist Krishen Rangasamy.

Sales at new car dealerships were up by 3.6% in dollar terms in March, although the number of new cars sold grew by more than 6%, as dealers offered deeper rebates.

Food and beverage stores sales increased for a third straight month, climbing by 0.9%, partly due to rising prices.

IE