TORONTO (Reuters) - Canada’s annual inflation rate in October rose to 2.4 percent from 2.2 percent in September as the air transportation, passenger vehicle and travel tour indexes accelerated, Statistics Canada said on Friday.
Separately, Canadian retail sales edged up by 0.2 percent in September from August to C$50.93 billion ($38.6 billion), in part due to higher sales at supermarkets and other food stores, the data showed.
Market reaction: CAD/
DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS AT SCOTIABANK
“I think it is generally constructive at the margin. We had a better end to the third quarter for the consumer, so it is a good jumping off point into the fourth quarter. I like the retail volumes up half a percent and the fact that StatsCan is flagging tornadoes and smoke in Ottawa and BC is idiosyncratic weights on the numbers, and so that should lift and you get a bit of a rebound effect in the fourth quarter. So taking into account all the details, it is a pretty good retail report.”
“And the CPI numbers ... we came in roughly in line with our expectations. Core at 2 percent, it’s not building traction, it has been stuck there throughout the year, but we are not slipping either, so there is resilience in terms of core prices as the bank has been tightening.”
“At the margin, it is generally constructive to a tightening bias (by the Bank of Canada).”
“Canadian CPI heated up again in October, although given the recent dive in oil prices that acceleration will prove temporary. Separately, September retail sales did little to help the tracking forecast.
“We see nothing here to tip the BoC’s hand towards a December hike. We continue to favor them waiting until Q1 2019, by which time we’ll hopefully see some improvement in growth data and global oil prices.”
“Overall, they’re both a little bit stronger than advertised, I don’t think enough to significantly change the outlook, but both came in a bit on the high side of expectations.”
“I don’t think that takes away from the fact that inflation is about to drop and drop pretty heavily next month, I think we’re going to see the headline number drop pretty heavily below 2 percent in the November reading. But still, it shows there was a little more underlying pressure than some had assumed.”
“Notably, core inflation did nothing in the month, it remains bang on the Bank of Canada’s target when you average the three. So, both the hawks and the doves have something to lean to here.”
“In terms of the retail number, that too was a little bit stronger than expected, again, not hugely off, but I think it’s enough to offset some of the softness that we saw in earlier reports on wholesale trade and manufacturing, and it likely means the economy ground out just a little bit of growth in the month of September.
“On the inflation side, I think it was as expected, not a huge shock to see something slightly above 2 percent with core measures coming in right around the target.
“On the consumer spending side, I think it’s a bit of a pleasant surprise. It’s nice to see the volumes coming up, a good way to end the quarter. Retail sales were encouraging from the de-leveraging point of view.”
Reporting by Matt Scuffham, Susan Taylor and Fergal Smith; Editing by Denny Thomas