Weekly Economic Update

For the week of July 23 – 27.shutterstock_721776619

It was a strong day for Canadian economic releases on Friday last week. Both retail sales and consumer prices data blew past expectations, and the Canadian dollar shared in the strength. Following the releases on Friday morning, the Canadian dollar strengthened against the US dollar by over one percent. Unsurprising, markets expectations for rate hikes over the upcoming three meetings increased on Friday slightly.

Retail sales grew by two percent for the month of May, twice as much as the one percent growth that was expected, and a drastic improvement from the 0.9 percent drop that was seen in April. Excluding autos, sales growth was closer to 1.4 percent (against expectations of a lesser 0.5 percent). The details of the release show that growth was seen in ten out of eleven measured sub-sections, with the largest upside contribution coming from new car dealers. The lone decline came from the supermarkets section.

Not to be outshined, consumer prices also beat expectations, growing by 0.1 percent and 2.5 percent on a month-over-month and year-over-year basis respectively. Expectations for the two measures were zero percent and 2.3 percent. Growth of 2.5 percent year-over-year marks the fastest acceleration seen since 2012. The largest upside contributor this month was transportation costs, while the largest drag was seen from the recreation and education category.

The Canadian dollar is trading relatively flat against the US dollar this morning. Today’s expected range is 1.3088 – 1.3188.


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