Inflation, retail trade numbers prove disappointing
The Canadian economy produced two batches of disappointing numbers Friday that experts said were certain to catch the Bank of Canada’s attention.
But despite unexpectedly weak inflation and retail sales data released by Statistics Canada, economists predicted the central bank will refrain from touching its benchmark interest rate any time soon.
The country’s annual inflation rate was 1.1 per cent in August as lower fuel prices dragged the reading to the lower reaches of the Bank of Canada’s target range. The result was below the 1.3 per cent year-over-year increase in July.
The federal agency also released fresh retail trade figures that showed total sales slipped 0.1 per cent in July, compared with the previous month. Revised figures showed that month-over-month retail sales were essentially flat in May and June after rising 0.8 per cent in April.
The sluggish July sales figures landed the same month that the federal government distributed cheques to families under its revamped child benefit plan.
Experts such as Bank of Montreal chief economist Doug Porter expect the Bank of Canada to take notice of both bundles of data.
“I would grade this one as a bit of an eyebrow raiser,” Porter said in an interview.
“It’s always notable when you get two significant reports like this, both pulling in the same direction — and they both are on the weak side of expectations.”
Still, Porter said he didn’t think there was enough disappointment to force the bank to seriously consider changing its position on the interest rate.
“But I think they probably will take a long look at both these reports with a bit of concern,” he added.
On inflation, the August consumer price index found prices rose in most major categories compared with a year earlier - with the cost of electricity, air transportation and passenger vehicles contributing the biggest upward pushes to the overall inflation rate.
Economists had predicted inflation to ring in at 1.4 per cent in August, according to Thomson Reuters.