Photo: The Canadian Press. All rights reserved.

Shoppers browser through products at a clothing store in Vancouver October 18, 2007. THE CANADIAN PRESS/Richard Lam

Retail sales in Canada rose more than expected in July, helped by strong auto sales.

Statistics Canada said Tuesday that Canadian retail sales were up 0.7 per cent to $39 billion in July, more than offsetting a decline in June, with eight of 11 subsectors reporting increases.

The broad-based improvement accounted for 72 per cent of retail trade in July.

The StatsCan numbers came in ahead of the 0.2 per cent gain that economists had been expecting.

"A solid July report suggests that consumer spending growth picked up in the third quarter from the second quarter's tepid pace," BMO Capital Markets economist Robert Kavcic wrote in a note to clients.

"Still, overall economic growth will be challenged to hit the Bank of Canada's two per cent forecast for the third quarter."

Automotive sales were up 1.7 per cent in July, mainly because of robust sales of new cars and high sales of recreational vehicles, motorcycles and boats.

Excluding autos, Kavcic said underlying spending was also slightly better than expected with a gain of 0.4 per cent.

TD Bank economist Diana Petramala said given all the weakness in the first half of the year, it was not that surprising to see retail sales pick up.

"The good news is that with improvements in market sentiment, some of the clouds overhanging the consumer should lift in the second half of this year," Petramala wrote in a report to clients.