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Investors don’t normally look to Canada for inspiration. Its economy, at roughly the size of South Korea’s, is not big enough to move the global needle. It is also perceived to be dominated by financials and mining companies, somewhat like Australia. Finally, with three-quarters of its exports bound for the US, Canada’s fortunes are pretty much tied to goings-on south of the border.

But investors should keep one eye on Canada. That is because, if the world is indeed emerging from recession at last, a country of Canada’s relative strength should be leading the way. Helped by solid government finances, a protected banking sector and a rapid rebound in commodity prices, Canada had a better recession than most. And its economy seems to be righting itself quickly. Output actually grew month-on-month in June for the first time in almost a year. In August, 27,000 jobs were created and sales of new homes set a new record in July.

All the more shocking, therefore, that retail sales for July, released on Tuesday, showed a fall of about half a per cent versus June. Economists were expecting a rise of about 0.7 per cent. To be sure, lower pump prices hurt, as did some bad weather – and a single month does not a trend make. But the fact that sales were weak across the board, from supermarkets to liquor and appliance stores, serves as a warning that the global consumer remains far from happy, in spite of what they may answer in confidence surveys. (The Conference Board of Canada’s consumer confidence index for August was up for the sixth straight month.)

Private consumption at 56 per cent of gross domestic product contributes less in Canada than elsewhere. Other economies with more profligate spenders must be hoping that Canada’s shoppers are just pausing for breath, rather than pointing to exhaustion to come.

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