REPEAT: MNI Cdn Data Preview:Gas Prices To Dampen CPI

Repeats Story Initially Transmitted at 21:28 GMT Nov 10/16:28 EST Nov 10

--First ADP Canada National Employment Report To Be Released Thursday

By Yali N'Diaye

     OTTAWA (MNI) - Inflation will be the highlight of the week on the data

front, with lower gasoline prices expected to drive October CPI growth pace

down, away from the Bank of Canada's 2% target.

     However, analysts pointed out that the central bank has signaled it is

likely to look through this temporary factor, even more so if the preferred core

measures increase.

     Other indicators of note include manufacturing sales for September, as well

as existing home sales and housing prices for October.

     New to the Canadian data scene will be ADP Canada National Employment

Report next Thursday.

     Looking at BOC appearances, Senior Deputy Governor Carolyn Wilkins will

deliver a speech in New York City Wednesday evening, at the Money Marketeers of

New York University, on "Monetary policy under uncertainty."

     Most analysts predict the BOC to remain on hold on December 6, meaning

Wilkins' speech is not expected to deviate from the message about the central

bank's "cautious" and data dependent approach.

     On the inflation front, analysts in a MNI survey expect headline CPI to

edge up 0.1% in October with forecasts ranging from flat to 0.2%, following a

0.2% monthly gain in September that owed much to a 5.9% increase in gasoline

prices.

     On a 12-month basis, inflation is expected to slow to 1.4%, with estimates

ranging from 1.3% to 1.5%, following a 1.6% increase in September as gasoline

prices rose 14.1%, "largely due to supply disruptions caused by Hurricane

Harvey," Statistics Canada reported.

     Such impact is expected to unwind in October, making gasoline prices the

major negative contributor.

     At BMO, economist Benjamin Reitzes will also "be watching for any signs

that the loonie's summer strength dampened prices, though its more recent

retreat suggests the currency will act as a smaller restraint on inflation in

the coming year."

     The BOC estimates the pass-though effects from the Canadian dollar's past

appreciation at 0.2 percentage point in the second half of 2017, and peaking in

the second half of next year when they are expected to subtract 0.5 points.

     But attention will be particularly on the three preferred core measures of

inflation, for signs of divergence with the headline number. The range of

underlying inflation measures has been picking up since reaching 1.2%-1.5% in

May and June, to reach 1.5%-1.8% in September.

     TD economists pointed out that the improving underlying measures of

inflation suggest "that slack continues to dissipate" and expect the BOC to look

through below-target CPI and hike rates in January.

     At the very least the BOC should not be surprised. 

     "A softer CPI print would not be a surprise to the BOC," Scotiabank

economists said in their commentary Friday, since the central bank projected

that CPI would rise on average 1.4% in both the third and fourth quarters of

this year.

     This sentiment is shared among several economists after BOC Governor

Stephen Poloz indicated this week he was not worried about low inflation

expectations, which he deemed well anchored, and as the central bank still sees

the 2% target in sight in the second half of 2018.

     Statistics Canada will publish the October CPI report Friday, November 17.

     On the housing front, The Canadian Real Estate Association will publish

existing home sales for October at 9:00 am ET November 15. Sales rose 2.1% in

September, but fell 11.0% year-over-year. BMO economist Benjamin Reitzes expects

a 7.0% 12-month decline in October, although prices should increase 5.0%

year-over-year, as sales increased in Vancouver.

     The Teranet-National Bank National Composite House Price Index will also be

published Wednesday. Prices contracted 0.8% in September, the largest monthly

decrease since September 2010, and the first since January 2016. On a 12-month

basis, prices were up 11.4%.

     Capital Economics Senior Canada Economist David Madani expects price growth

to further slow down in October to 9.5% year-over-year.

     "The recent downturn in home sales in Toronto has led to a big drop in the

national home sales-to-new listings ratio," he wrote in his research note.

"Given the long lags in certain house price data, that drop indicates there has

already been a sharp slowdown in house price inflation."

     The next day, on November 16, Statistics Canada will publish data on

manufacturing activity, with analysts in a MNI survey expecting sales to

contract 0.5% on the month, with forecasts ranging from -1.0% to +0.9%.

     While industrial product prices were down 0.1% on the month, they rose 4.4%

for energy and petroleum products, which is expected to provide some boost to

nominal sales of petroleum and coal products.

     However, transportation is expected to be a negative contributor given the

GM auto workers strike from September 17 through mid-October.

     Also Thursday, Canada will see for the first time its own ADP employment

report, which going forward will be published the third Thursday of each month.

     It remains to be seen how the influential the report will become,

especially given that it is released later than Statistics' Canada Labor Force

Survey, which so far has been the center of the market attention on the

employment data front. However, it is released before the agency's payroll data.

     "Even if it 'works' as a predictor of the actual StatCan payrolls data,

that won't be as helpful in Canada, given that the market puts more weight on

the less accurate household survey employment figure," CIBC Chief Economist

Avery Shenfeld opined in its weekly research note.

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