C Citigroup Inc

OTTAWA—Canadian retail sales rose more than expected in June on higher sales of gasoline and cellphones, but volumes were flat, indicating the increase was entirely due to higher prices.

The value of Canadian retail sales rose 0.6% to a seasonally adjusted 43.19 billion Canadian dollars ($33.02 billion) in June, Statistics Canada said Friday. Market expectations were for a 0.2% gain, according to economists at Royal Bank of Canada. However, retail sales volume—which economists say offers a better gauge of economic activity, stalled in the month.

"There's a bit of false joy here," said Jimmy Jean, economist at Desjardins Capital Markets, referring to the headline number, noting the impact of higher gasoline prices. "At least it's not a negative" reading, he added.

The June retail sales report marks the last major piece of economic data to emerge before the Sept. 1 release of Canadian gross domestic product figures for June and the second quarter. Canada's economy shrank in the first five months of 2015, and some economists and ratings firms suggest Canada sustained a mild recession in the first half of the year due to the fallout from lower prices for commodities, which are key drivers of Canadian growth.

With all the major indicators now available, Mr. Jean said Canada is "definitely tracking" for a healthy gain in June GDP.

The Bank of Canada has pointed to stronger consumer spending as one of positive elements to emerge from lower oil prices. Since Canada is a major exporter of crude oil, lower prices are having an overall negative effect on Canada's economy.

The retail sales data suggest there remains enough confidence among Canadians to keep spending, said BMO Capital Markets. However, it added, "don't expect consumers to do the heavy lifting for growth amid high [consumer] debt levels, a weakening dollar, and sticky gasoline prices."

On a year-over-year basis, retail sales rose 1.4% in June. Excluding motor vehicle and parts sales, retail sales expanded 0.8% in June, to C$32.67 billion.

Statistics Canada said eight of the 11 retail sales sectors it tracks posted increases in June. Gasoline stations recorded the largest gain in dollar terms, up 2.6% to C$4.82 billion. The data agency attributed the gain to a 6% increase in pump prices.

Sales at electronics and appliance outlets advanced 9.4% to C$1.30 billion, as consumers took advantage of new Canadian regulations allowing them to dump existing wireless-service contracts and acquire new cellphones.

Leading the decliners were car and auto parts dealers, which recorded a 0.1% decline to C$10.52 billion, and clothing stores, down 0.4% to C$2.50 billion.

Write to Paul Vieira at paul.vieira@wsj.com

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(END) Dow Jones Newswires

August 21, 2015 10:45 ET (14:45 GMT)

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