REPEAT: Canada Data Preview: Gas Prices To Boost CPI, Sales

Repeats Story Initially Transmitted at 20:19 GMT Oct 13/16:19 EST Oct 13

By Yali N'Diaye

     OTTAWA (MNI) - For the data dependent Bank of Canada, the coming week will

bring important information, with inflation for September along with retail

sales for August, and the central bank's very own Business Outlook Survey.

     The Bank of Canada has clearly stated it is particularly watching the

economy's potential and labor market conditions to form its view on inflation

outlook, and on that front, what firms say about investment plans and hiring

intentions and shortages will be important.

     "We need to understand the view from both Main Street and Bay Street to

help inform our outlook for growth and inflation," BOC Governor Stephen Poloz

said in his most recent speech on September 27.

     "One of the most important vehicles for these efforts is our Business

Outlook Survey," he said.

     In the summer survey, the Bank found that capacity pressures had increased

overall. "Together with rising indicators of labor shortages, responses suggest

that slack is being absorbed," the BOC said. Since then the Canadian economy has

continued to add jobs, and recently, wage growth has picked up.

     Also informing on the state of capacity pressures in the survey to be

published Monday at 10:30 am ET will be the type of investment businesses focus

on: to expand capacity or simply maintenance.

     "We should also highlight the importance of inflation expectations,"

stressed David Madani, economist at Capital Economics.

     "Although the balance of opinion in the 1% to 2% segment has been the

highest by far for more than a year, any shift here back towards the higher 2%

to 3% segment would provide the Bank

with additional justification, in its mind, to raise interest rates further," he

said.

     Looking at hard data, Statistics Canada will release both the CPI report

for September and the retail sales report for August on Friday.

     Analysts in a MNI survey expect headline CPI to pick up in September to

0.3% month-to-month from 0.1% in August, and to 1.7% year-over-year from 1.4% in

August.

     In fact, IHS Markit economists even see 12-month inflation approaching the

2% target in September at 1.9% due to higher gasoline prices as a result of

supply disruptions caused by hurricanes.

     While the boosting impact of gas prices on energy and overall CPI is shared

by the consensus, the extent of the impact differs, leading to a forecast rage

of 1.5% to 1.9% year-over-year, in all cases representing a pickup from August.

     On the downside, analysts are also watching the impact of the appreciation

of the Canadian dollar on overall inflation, especially food and clothing.

     Going forward, "our models suggest the Canadian dollar's huge appreciation

in Q3 will weigh meaningfully on CPI through the course of 2018," wrote BMO

Canadian Rates and Macro Strategist Benjamin Reitzes in a weekly commentary.

     Gas prices are also expected to boost retail sales in August, along with

auto sales.

     Analysts' forecasts in a MNI survey center on a 0.5% increase in headline

sales and a 0.3% rise in core sales excluding autos, following gains of 0.4% and

0.2%, respectively in July.

     Prior to that, Statistics Canada will release the monthly survey of

manufacturing for August on Wednesday, with analysts expecting a further 0.7%

contraction in August following a 2.6% drop in August, consistent with lower

exports on the month. Forecasts range from -1.7% to +0.5% for this volatile

indicator.

     Despite the weakness in exports, RBC economists point out the strong

domestic demand, "which has shown little sign of faltering to-date."

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