Booming economy might mean earlier rate hike

Canadian economic bulls got some early Christmas presents last week, and that’s boosted — albeit only slightly — the odds of an interest rate hike in January.

While October’s GDP report served up a lump of coal, coming in below expectations, two other data points paint a much brighter picture.

Wholesale trade figures for October climbed by 1.5 per cent, and retail sales matched that gain, with improvements coming from all provinces.

“The two reports suggest that consumers were out in full force ahead of the most important weeks for retailers,” said Michael Dolega, senior economist at TD Bank.

However, the strong showing for the consumer in the fourth quarter comes at a time when overall economic growth appears less robust.

Dolega noted that much of the weakness in October was a related to one-off factors, including maintenance-related shutdowns in the oil and auto sectors, and a warm start to the heating season.

As a result, the economist expects above-potential Canadian economic growth to continue supporting inflation. Consumer prices climbed a healthy 0.5 per cent in November, bringing inflation up to 2.1 per cent from 1.4 per cent in October.

The rebound in energy prices helped, but almost all major categories experienced higher inflationary pressures.