By Leah Schnurr
OTTAWA, May 20 (Reuters) - Canadian retail sales fell more
than expected in March as consumers bought fewer cars,
underscoring expectations that the economy slowed heading into
the second quarter.
Separate data from Statistics Canada on Friday showed the
annual inflation rate rose to 1.7 percent in April, in line with
forecasts. The core inflation rate, which strips out some
volatile items and is watched by the Bank of Canada, was more
robust, rising to 2.2 percent.
Nonetheless, neither report was expected to change the path
of monetary policy, with the central bank widely expected to
hold interest rates at 0.50 percent when it meets next week.
BOCWATCH
"I don't think it changes the big picture for either the
dollar or the Bank of Canada," Doug Porter, chief economist at
BMO Capital Markets, said of the releases.
The Canadian dollar weakened slightly against the greenback
immediately following the data. CAD/
The 1.0 percent decline in retail sales exceeded economists'
forecasts for a decrease of 0.6 percent, though February was
revised slightly higher to a gain of 0.6 percent. In volume
terms, sales in March declined 1.3 percent.
"The important point for retail sales was this followed two
extremely strong months and I don't think it takes away from the
broader picture that the Canadian consumer has held up
remarkably well so far in 2016," said Porter.
Sales at car and parts dealers dropped 2.9 percent as
Canadians bought fewer new and used cars. Excluding autos,
overall sales were down just 0.3 percent.
Recent data, including Friday's retail sales report, suggest
the economy began to cool heading into the second quarter but
first-quarter growth is still expected to have been relatively
strong.
"Looking at Q1 as a whole, we're still looking at
above-trend growth in Canada," said Andrew Kelvin, senior rates
strategist at TD Securities.
The recent wildfires in Alberta that have disrupted oil
production in the region are expected to further damp down
growth in the second quarter, but economists expect to see a
rebound in the latter part of the year.
The annual inflation rate was lifted as consumers paid more
for food and shelter, while annual declines in energy prices
moderated.
The increase brought the rate closer to the central bank's 2
percent target, though the bank has said inflation is being
influenced by temporary factors.
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Graphic - Canada inflation, central bank rate: http://link.reuters.com/cut67s
Graphic - Canada economic dashboard: http://graphics.thomsonreuters.com/15/sc-canada/index.html
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