Retail sales rose by 0.6% in December to an estimated $35.1 billion on the strength of sales by new car dealers, Statistics Canada reported today.

This was the third increase in retail sales in four months and helped make 2007 the year with the second highest retail growth rate since 2002, the government agency said.

In 2007, retailers sold an estimated $412.2 billion worth of goods and services, up 5.8% over 2006.

Sales in the automotive sector, up 3.2%, accounted for most of the December increase.

Excluding two of the sector’s components — new car dealers and used and recreational motor vehicles and parts dealers — retail sales fell 0.4% in December, the first decrease in five months.

The agency reports holiday sales got off to a hot start in November, but lost steam quickly, leaving traditional Christmas retailers with disappointing sales in December.

Clothing and accessory stores were down 2.7%, miscellaneous retailers dropped 1.2, furniture, home furnishings and electronics stores fell 1.1 and food and beverage stores slipped 0.8, while building-and outdoor home-supplies stores dipped 1.2.

After November posted the biggest jump in monthly sales since early 2007, general merchandise stores faced only moderate 0.5% growth in December while, at 0.1%, sales at pharmacies and personal-care stores continued to stagnate.

When price changes are taken into account, retail sales in constant dollars rose 0.4% in December.

Retailers posted a 1.2% increase in sales in the fourth quarter, mainly due to a 2.9% hike in sales in the automotive sector.

A 4.4% increase in December sales by new car dealers was primarily attributable to truck sales, which were up 7.7%.

Retail sales in Canada’s three largest cities lagged behind the national average. Retail sales in Toronto were up 5.4%; Vancouver sale climbed 5.3, while Montreal came in at a 3.2% growth.

Saskatchewan dominated provincial retail sales in 2007 as its retail sales surged 12.9%, almost double the previous year’s growth and the province’s biggest retail growth since 1991.

Alberta ranked fourth among the provinces in 2007, with a 9% rise in retail sales, trailing record 9.4% growth in both Manitoba and Newfoundland and Labrador.