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Free AccessMNI Canada Data Preview: Don't Get Carried Away By CPI Jump
--Headline CPI To Hit Target In November,But underlying Trend STill Below 2%
--October GDP Seen Progressing Further on
By Yali N'Diaye
OTTAWA (MNI) - Analysts expect Canadian inflation to hit the Bank of
Canada's 2.0% target in November, a jump from 1.4% in October, but they warned
not to be carried away by the headline number that will mostly reflect higher
gas prices and base effects.
In fact, when Statistics Canada publishes inflation data Thursday,
underlying inflation is still expected to be well below 2%, even as the lower
Canadian dollar could have a supporting effect.
For Scotiabank economist Derek Holt, the consensus on inflation is even too
high. But even if headline CPI came in at 1.8%, as the he expects, "one would
hope that a central bank wouldn't find a lot of information in changes in CPI
inflation that are motivated by base effects, gas prices and seasonality," he
wrote in a commentary.
The other key indicators will be October retail sales, also on Thursday, as
well as October GDP on Friday.
Analysts in a MNI survey expect retail sales to rise 0.5% in October, and
0.3% excluding autos.
For GDP, analysts expect a 0.1% increase, as gains in real estate,
wholesale sales, and ongoing strength in the labor market all point to higher
growth, which should be moderated by weakness in goods-producing industries, led
by manufacturing and utilities.
Given the 1.5% drop in real manufacturing shipments in October, Action
Economics analyst Ryan Brecht told MNI he expects manufacturing to be the main
negative contributor to real GDP.
On the other hand, energy is expected to be the largest positive
contributor, while retail sales should also "make a meaningful positive
contribution," and construction production should bring support as well. Brecht
expects October GDP to rise 0.2%.
It would put growth on track to reach an annualized rate of 2.6% in the
fourth quarter, roughly in line with the 2.5% projected by the Bank of Canada.
At IHS Economics, Director Arlele Kish, who also expects fourth quarter GDP
growth to come in at 2.6%, expects uncertainties to still put off a rate hike to
April 2018.
"The economy is performing well and inflation is firming coming closer to
'home' as the Governor states," she told MNI. "However, the risks to the outlook
are still heavily dependent on so many 'unknowns' like trade policy outcomes,
home borrowing patterns, and the digital economy that it is better to remain
cautious given that we are in a new economic environment."
In addition to CPI, retail sales and GDP, Statistics Canada will release
Tuesday the first estimates from the Canadian Housing Statistics Program on
residential property in the Toronto and Vancouver Census Metropolitan Areas
(CMAs). This should provide more insight about the foreign ownership rate in
particular.
--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com
[TOPICS: M$C$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.