Canada – The consumer price index dropped 0.2% in August, allowing the year-on-year inflation rate to decline two ticks to 1.1%. In seasonally adjusted terms, CPI was down 0.1% as higher prices for health care, clothing, shelter and household operations were more than offset by a decline in recreation/reading and food. The core CPI, which excludes eight of the most volatile items, was flat, which allowed the annual core rate to drop three ticks to 1.8%, the lowest in two years. In seasonally-adjusted terms, core CPI was flat. Goods prices are moderating, suggesting perhaps that the effects of earlier C$ depreciation are fading. Services inflation was also weak in August. Assuming September core inflation is in line with historical norms, core CPI should average 1.9% on a year over year basis in Q3, slightly below the Bank of Canada’s Monetary Policy Report estimates of 2.0% published back in July.
Retail sales fell 0.1% in July, disappointing consensus which was looking for an increase of 0.1%. In July, sales fell in five of the 11 subsectors, including autos. Excluding autos, sales fell 0.1%, also disappointing consensus which had expected an increase of 0.5%. Gasoline station receipts were down sharply in the month in line with sinking pump prices. But there were also lower revenues for sellers of furniture/home furnishings, food/beverage, and health care products, which more than offset gains for sellers of electronics, building materials, sporting goods, general merchandise and miscellaneous items. Looking at provinces, on a year-on-year basis, BC leads the way (+6.4%), while Quebec (+3.8%) and Ontario (+3.3%) are also well above the national average of 2.3%. Newfoundland & Labrador (-3.9%) and Alberta (-3.8%) continue to struggle. In real terms, Canada’s retail sales rose 0.3%, something that will give a boost to July GDP. The quarterly picture is also looking good. Even assuming no change in August and September, real retail sales are on track to grow in Q3 after contracting the prior quarter.
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