May 18, 2018 / 12:49 PM / 4 months ago

Canada annual inflation rate edges down to 2.2 percent in April

TORONTO (Reuters) - Canada’s annual inflation rate in April cooled slightly to 2.2 percent from 2.3 percent in March, as prices in seven of the eight major components rose year-over-year, Statistics Canada said on Friday.

Canadian retail sales increased by 0.6 percent in March from February to C$50.24 billion ($39.2 billion), on stronger performances by new car dealers, Statistics Canada said on Friday.

NATHAN JANZEN, SENIOR ECONOMIST AT ROYAL BANK OF CANADA

“A little bit mixed. We had a small downside surprise on inflation, although the Bank of Canada’s preferred measures looked like they picked up very slightly. And then on retail sales, I think generally good ... it’s confirming that some of the weakness that we saw over the holiday shopping period was probably more payback for outsized gains earlier on than a real fundamental deterioration in the underlying trend.”

“It still fits with their (Bank of Canada’s) view that they are going to have to pull back on monetary policy stimulus in the system but inflation isn’t really pushing them to do it in a really fast way that would destabilize the household sector.”

DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS, SCOTIABANK

“It’s a pretty solid set of overall numbers.”

“The core inflation average is unchanged at 2 percent, so it’s still tracking on target. And that plays against the argument that we’re just going through transitory upward pressures on inflation.”

“Retail sales were stronger than the headline, I think. The volumes were up eight-tenths. The key here is that across a number of indicators: retail, trade - so the export and import numbers, manufacturing, we ended Q1 very favorably and we’re going into a solid rebound into Q2 with core inflation hanging in at the Bank of Canada’s target, so to me, that’s good enough to go on rates. We’ll see whether or not they do on May 30, but I think they have the conditions to do so.”

DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS

“The CPI was largely as we expected. No big change and no big surprise here. The one thing that is notable is that the annual inflation rate took a small step back even though gasoline prices were fairly robust through the spring.

“Retail sales on the surface looked better than expected but it was mostly due to autos. There again I think there’s a little less there than meets the eye.”

Reporting by Matt Scuffham, Susan Taylor and Fergal Smith; Editing Denny Thomas

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