Retail gain in decade aids Canada oil-shock rebound

Bloomberg

Canada’s consumer is showing no signs of letting up. Retailers are off to the best start of the year since 2005, and consumer price pressures are stronger than anticipated, data show. That adds to evidence that households are leading a rebound in growth that’s on track to be among the fastest in the Group of Seven this year.
“The Canadian economy is a little more resilient than what we would have expected a few months ago,” said Andrew Kelvin, senior fixed-income strategist at Toronto Dominion Bank. Consumers are “one of the most stable pillars of support.”
Household spending remains a strong piece of Canada’s recovery from a commodities crash, with low interest rates supporting purchases of homes and cars that is easing the pain felt in Alberta’s oil patch.
Retail sales increased 0.4 percent to C$44.2 billion ($34.8 billion) in February, Statistics Canada said in Ottawa, following a 2 percent gain in January. None of the 18 economists in a Bloomberg News survey predicted any increase, and the median estimate was a 0.8 percent decline. That’s even with falling gasoline prices reducing revenue for gas retailers. The volume of retail sales — which factors out price changes — rose 1.5 percent. Total retail sales increased 2.5 percent in January and February, the strongest two-month gain to start the year since 2005.
Friday’s retail data supports the view that Canada’s economy grew at a robust pace in the first quarter. It “gives us a bit more confidence that Q1 GDP growth will come in 3 percent or better,” Doug Porter, chief economist at Bank of Montreal, said in a note to investors.
Canada’s dollar strengthened 0.6 percent to C$1.2661 per U.S. dollar at 10:45 a.m. in Toronto. Five-year federal government bond yields rose for a fifth day Friday, to 0.87 percent from 0.82 percent, the highest since December.
In a separate release Friday, Statistics Canada data showed inflation excluding gasoline was stronger than expected.
The core inflation rate that excludes eight volatile products unexpectedly increased to 2.1 percent, compared with 1.9 percent in the prior month. Total inflation slowed in March to 1.3 percent, but that was led by a 13.6 percent drop in gasoline prices.
Economists surveyed predicted overall inflation of 1.2 percent, and a core rate of 1.7 percent.