Canadian Inflation, Retail Sales Advance Less Than Expected

Canada’s inflation rate accelerated less than economists forecast in May as a jump in natural gas prices was partly offset by a drop in transportation costs, while retail sales for April also rose less than expected.

The consumer price index rose 0.7 percent in May from a year ago, following a 0.4 percent April gain that was the slowest since October 2009, Statistics Canada said today from Ottawa. The core rate, which excludes eight volatile products, advanced at a 1.1 percent pace for a second month. Economists surveyed by Bloomberg forecast that total inflation would be 0.9 percent and the core rate would be 1.2 percent.

Bank of Canada Governor Stephen Poloz said two days ago that he has flexibility in how fast he brings inflation back to his 2 percent target. The central bank has kept its key lending rate at 1 percent since September 2010 and Poloz said business investment and exports must take over from consumer spending as the major source of economic growth.

“We don’t think it’s likely that the Canadian economy can lean on the consumer to generate much growth going forward,” Ian Pollick, a senior fixed-income strategist at Royal Bank of Canada’s capital markets unit, said by telephone from Toronto.
The Canadian dollar fell 0.9 percent to C$1.0484 per U.S. dollar at 8:51 a.m. in Toronto. One dollar buys 95.41 U.S. cents.
Food prices rose 1.3 percent in May from a year ago compared with a 1.5 percent April gain, Statistics Canada said. Natural gas costs jumped 15.4 percent, the most since December 2008, with the third gain in four months following 25 consecutive declines.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell