MNI 5 THINGS:Gas Prices To Weigh On Canada M/M CPI, Retail Sls

By Yali N'Diaye   

     OTTAWA (MNI) - Analysts expect Consumer Price Index inflation to return to

positive territory in October and for September retail sales to be flat, in

releases due on Friday.

     We highlight five themes for particular attention:

     - Analysts in a MNI survey expect total CPI to edge up 0.1% in October

after dropping 0.4% in September, when air transportation, the largest downward

contributor, fell 16.6%, the largest decrease since January 1988. On a 12-month

basis, the headline CPI targeted by the Bank of Canada is expected to rise at a

steady pace of 2.2% in October. This will be the last inflation reading before

the next BOC meeting on Dec. 5.

     - Retail sales are expected to be flat in September after contracting 0.1%

in August, when analysts had foreseen a 0.4% gain. A flat showing would fit the

BOC's scenario of a consumer spending slowdown in the third quarter.

     - Lower gasoline prices are likely to weigh on September retail sales

through gasoline station receipts, which were down 2.0% in August. Gas prices

are also likely to maintain downward pressure on October inflation following a

1.1% drop in September that made gasoline the fourth-largest downward

contributor to the monthly CPI decline.

     - New unadjusted motor vehicle sales decreased to 177,825 units in

September from 185,214 in August, according to Statistics Canada, which could

translate into a decline on an adjusted basis. Analysts in an MNI survey expect

retail sales excluding autos and parts to rise 0.2%, which suggests only

moderate offsets from core sales.

     - Given the impact of gasoline prices on both inflation and retail data, it

will be particularly worth focusing on core figures. On the price front, the

BOC's three preferred measures of inflation have been hovering around 2.0% in

recent months, and remained in a 1.9%-2.1% range in September. The BOC, which

uses these measures as an operational guide, continues to expect core inflation

to remain around 2.0%.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

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