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19 Feb 2016
CAD: Setting up for retail sales (December) and CPI (January) - TDS
Research Team at TDS, suggests that the Canadian market attention will be more keenly focused on December retail sales which will compete with the simultaneous release of January CPI.
Key Quotes
“In assessing the balance of risk for both releases, we are cognizant of a weaker-than expected retail sales print while core CPI could surprise to the upside in large part due to higher administrated prices.
Retail Sales: All of the factors that contributed to a stronger November print for retail sales will to conspire to pull December sales down by a forecasted -0.8% m/m. Auto sales finished the year on a softer footing and when excluded from the calculation will leave core retail sales down a more subdued 0.6%. Outside of autos, lower gasoline prices and a softer month for the housing market will contribute to more fatigue in overall spending.
The temporary lift to sales provided by Black Friday promotions is also expected to reverse which adds an additional weight on headline sales. Turning to the volumes metric, the seasonally adjusted CPI series showed a modest 0.1% monthly advance which suggests a slightly larger decline in retail volumes of between 0.9-1.0%. For industry-level real GDP, retail volumes are expected to provide a counterbalance to some of the strength reflected in other activity measures released earlier in the week.
CPI: January's CPI report will balance a significant drag from energy prices with a set of regulated price increases and the inflationary impact of a depreciating currency. The energy component—which fell by an estimated 5.0% in the month—is set to provide an equal offset for headline prices which should remain flat m/m on an unadjusted basis and fall 0.1% on an adjusted basis. Despite the flat reading in the monthly index, the year-ago measure of headline inflation is expected to nudge higher by two tenths of a percentage point to 1.8%.
Core prices are forecast to be more persistent, increasing by 0.3% m/m. Telecommunications, electricity, and public transit are among the categories expected to show an increase in the month. Prices for food and other imported goods should also increase while the return of seasonal temperatures will push clothing prices higher. When measured on a year-ago basis, core inflation is forecast to have increased to 2.0%.
In placing this release in a wider context, core inflation bouncing around the Bank of Canada's target will do little to inform the debate surrounding monetary policy. The key lies with activity data and barring a major surprise from CPI, the simultaneous release of retail sales is expected to determine the market response.”
Key Quotes
“In assessing the balance of risk for both releases, we are cognizant of a weaker-than expected retail sales print while core CPI could surprise to the upside in large part due to higher administrated prices.
Retail Sales: All of the factors that contributed to a stronger November print for retail sales will to conspire to pull December sales down by a forecasted -0.8% m/m. Auto sales finished the year on a softer footing and when excluded from the calculation will leave core retail sales down a more subdued 0.6%. Outside of autos, lower gasoline prices and a softer month for the housing market will contribute to more fatigue in overall spending.
The temporary lift to sales provided by Black Friday promotions is also expected to reverse which adds an additional weight on headline sales. Turning to the volumes metric, the seasonally adjusted CPI series showed a modest 0.1% monthly advance which suggests a slightly larger decline in retail volumes of between 0.9-1.0%. For industry-level real GDP, retail volumes are expected to provide a counterbalance to some of the strength reflected in other activity measures released earlier in the week.
CPI: January's CPI report will balance a significant drag from energy prices with a set of regulated price increases and the inflationary impact of a depreciating currency. The energy component—which fell by an estimated 5.0% in the month—is set to provide an equal offset for headline prices which should remain flat m/m on an unadjusted basis and fall 0.1% on an adjusted basis. Despite the flat reading in the monthly index, the year-ago measure of headline inflation is expected to nudge higher by two tenths of a percentage point to 1.8%.
Core prices are forecast to be more persistent, increasing by 0.3% m/m. Telecommunications, electricity, and public transit are among the categories expected to show an increase in the month. Prices for food and other imported goods should also increase while the return of seasonal temperatures will push clothing prices higher. When measured on a year-ago basis, core inflation is forecast to have increased to 2.0%.
In placing this release in a wider context, core inflation bouncing around the Bank of Canada's target will do little to inform the debate surrounding monetary policy. The key lies with activity data and barring a major surprise from CPI, the simultaneous release of retail sales is expected to determine the market response.”