Canada in focus with retail sales and CPI to come

Lloyd Doyle
July 23, 2018

Inflation accelerated last month to an annual clip of 2.5 per cent, up from a 2.2 per cent reading in May, said Statistics Canada's latest consumer price data. The lowest is in Quebec, where the rate of increase has been two per cent.

Statscan said the inflation data showed energy prices rose by 12.4 percent from June 2017, higher than the year-on-year 11.6 percent increase in May.

Higher gas prices were one of the major factors in the increase, as pump prices have risen by 24.6 per cent from last summer's level. It was the bank's fourth hike over the last 12 months.

It's the highest inflation rate on record since February 2012, the data agency said. It also moved the number farther away from the two per cent mid-point of the Bank of Canada's target range.

Canadian Imperial Bank of Commerce chief economist Avery Shenfeld echoed that thought, saying an elevated inflation rate would keep pressure on the central bank.

"Indeed, they will likely want to see how much growth tails off after the second quarter rebound".

According to National Bank of Canada's analysts, Krishen Rangasamy, the rise in prices during June was a surprise even to the Bank of Canada.

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The Bank of Canada can use interest rate hikes as a tool to help prevent inflation from climbing too high. CPI common, which the central bank says is the best gauge of the economy's underperformance, stayed unchanged at 1.9 percent. "The Canadian dollar is trading stronger, and fixed income has sold off", he adds.

The Canadian Dollar advanced against all of the G10 on news that retail sales grew 2.0% on a month-on-month basis in May, well ahead of expectations for a 1.1% read.

In a separate release, Statistics Canada said retail trade expanded by 2% in May thanks to higher sales at vehicle and auto parts dealers as well as gas stations.

StatsCan said seven of eight major components rose year over year with the transportation index (+6.6 per cent) the largest contributor, while the household operations, furnishings and equipment index (-0.1 per cent) was the lone major component to decline.

The healthy retail sales were stronger than the 1.1 percent increase forecast by economists in a Reuters poll had predicted a 1.1 percent increase from April.

Here's what happened in the provinces (previous month in brackets).

Other reports by Iphone Fresh

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