(Bloomberg) — Interest rate cuts by the Bank of Canada since June appear to have encouraged more Canadian consumers to spend in the third quarter.

Receipts for retailers rose 0.4 per cent in September, the third straight monthly increase, according to an advance estimate from Statistics Canada released on Friday. That followed a similar 0.4 percent rise in August, slightly missing the 0.5 percent expectation in a Bloomberg survey of economists.

While consumer spending in these two months was weaker than July’s 0.9% rise, third-quarter retail sales are on track to rise 0.8%, the strongest pace since the end of last year. This is likely driven in part by the Bank of Canada’s three 25 basis point rate cuts between June and September.

The central bank cut borrowing costs further by half a percentage point this week to boost economic growth and spending, which has been weak despite the country’s high population growth driven by strong immigration.

The increase in August was largely driven by higher sales at auto and parts dealers, contributing almost a percentage point to the monthly increase, which was offset by declines elsewhere. Clothing and sporting goods retailers posted small increases. In volume terms, retail sales rose 0.7% in August.

Economists had expected a broader rise in retail sales, with an average forecast for a 0.4% increase in sales excluding cars, suggesting categories other than cars would drive most of the sales growth in that month. In contrast, receipts excluding cars fell 0.7%, with declines in five of nine subsectors.

Core retail sales, which exclude gas stations as well as car dealerships, fell 0.4 percent.

“Today’s report suggests that consumer spending remains flat and further interest rate cuts are likely to be needed to bring about a sustained acceleration,” Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said in a note to investors.

The mixed report shows consumers remain cautious, Charles St-Arnaud, chief economist at Alberta Central, said in an email.

“There’s not much here that’s going to change our or the Bank of Canada’s view of the economy,” he said.

“As most of the growth is driven by population growth, the new immigration targets add significant uncertainty to the outlook for consumer spending for the coming years. We continue to believe the Bank of Canada should cut its policy rate by 50 basis points in December.”

Canada’s population has grown since the pandemic, adding more than two million people in the past two years. Prime Minister Justin Trudeau on Thursday announced a plan to halt population growth in 2025 and 2026, which is likely to dampen growth in consumer demand.

Regionally, sales rose in seven out of ten provinces in August, with the largest increase seen in Ontario, led by higher car sales. Revenues also rose in Toronto and Montreal, the country’s two largest cities.

The statistics agency did not provide details on the September estimate, which was based on responses from 61.1% of companies surveyed. The average final survey response rate over the last 12 months was 89.1%.

–With assistance from Jay Zhao-Murray.

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