More signs of weakness as retail sales post decline
Inflation also remains below BoC’s range
OTTAWA • Canada’s consumer prices advanced 0.9 per cent in May from a year earlier while retail sales for April posted a surprise decline, signs the second-quarter recovery the central bank is counting on remains in doubt.
Core inflation, which excludes eight volatile products, slowed to 2.2 per cent from 2.3 per cent in April, Statistics Canada said Friday. April retail sales fell 0.1 per cent on declines in food and electronics. Economists had expected sales to rise 0.7 per cent, according to the median forecast in a Bloomberg News survey.
Total inflation, while exceeding April’s 0.8 per cent pace, is still outside the Bank of Canada’s 1 per cent to 3 per cent target range.
The 0.1 per cent April decline in retail sales exceeded even the most bearish economist forecast, sug- gesting economic weakness in the first quarter from lower crude oil prices is lingering into the second. StatsCan said sales at electronics and appliance stores plunged 8.8 per cent amid “store closures and the timing of new product releases.” Target Corp. closed the last of its Canadian stores in April after a failed expansion north of the border.
“The economy is going to remain sluggish,” Doug Porter, chief economist at BMO Capital Markets, said in an interview. He predicts annualized second-quarter growth of about 0.5 per cent. “The bigger surprise was definitely in retail sales.”
The Bank of Canada said in its May 27 interest-rate decision slack in the economy is keeping the “trend” inflation rate between 1.6 per cent and 1.8 per cent, below a target of 2 per cent. Lower energy prices and extreme weather, combined with stagnant global demand, are keeping a lid on the nation’s economic growth.
“The hand-off is clearly a negative one,” governor Stephen Poloz told reporters after the May rate decision, saying the effects of the “horrible winter that we had didn’t end on March 31.”
The economy is going to remain sluggish. The bigger surprise was in retail sales