Canadian Retail Sales and Inflation
Canadian retail sales declined for the first time in three months, falling 1.2 per cent in April on a monthly basis. On year-over-year basis, retail sales in April were up just 1.6 per cent over last year. Sales were down in 8 of 11 sub-sectors representing 65 per cent of total retail trade with the biggest declines coming in the motor vehicle and parts sector. Conversely, in BC, retail sales were up 1.1 per cent on a monthly basis and 5.9 per cent year-over-year.
Canadian inflation, as measured by the Consumer Price Index (CPI), held steady at 2.2 per cent in May. Likewise, the Bank of Canada's three measures of trend inflation were all essentially unchanged at 1.9 per cent. In BC, provincial consumer price inflation was 2.7 per cent in the 12 months to May, the same rate of increase as in April.
While we still expected at 25 basis point increase in the Bank's policy rate at its July meeting, today's poor retail sales figures and non-accelerating inflation, along with yet another Trump trade tantrum, may prompt some caution at the Bank of Canada.
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