Research Team at TDS, suggests that the theme of stronger Canadian economic data is expected to continue with the release of January retail sales.
“Retail sales are expected to rebound from what was a very weak print in December. Retail sales is arguably more important for the market as the Bank of Canada has shifted its attention to growth risks versus inflation. But with Q1 real GDP growth running more than a percentage point ahead of what was forecast in the January MPR, further confirmation of this upside surprise should not have that dramatic of an impact on the market.
After finishing 2015 on an exceptionally weak footing, January retail sales likely staged a modest rebound. Headline sales are forecast to have increased by 0.4% m/m as stronger auto and existing home sales help to offset a sharp drop in sales at gasoline stations. Measures of consumer confidence were quite weak to start the year, suggesting that spending elsewhere was curtailed amid falling energy prices and a plunging currency. Excluding stronger auto sales, the core retail print should show a monthly gain of 0.2% in the month.
Higher consumer prices—partially driven by the weakness in CAD—will likely subtract from the nominal headline and further imperil retail volumes. This outcome will take some of the momentum away from the strong manufacturing sales print that implied a 0.3% m/m growth rate in industry-level real GDP.”
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