Published: Fri, May 19, 2017
World | By Paul Elliott

Inflation holds at 1

Inflation holds at 1

Canada's annual inflation rate held steady in April as a seventh consecutive decline in food prices offset higher gasoline, while March retail sales rose more than expected, suggesting consumer spending held up as the economy headed into the second quarter.

"The modest core inflation we're seeing is probably the single, strongest argument the Bank of Canada has to do nothing", Porter said, adding that ongoing uncertainty over USA policy, particularly on trade, would be up there as well.

There's certainly no shortage of reasons why the Bank of Canada could start to think about higher interest rates.

"With inflation readings weakening, but remaining within the Bank's target range, expect no change in interest rates from the Bank of Canada any time soon", IIHS economist Arlene Kish said.

The annual inflation rate held at 1.6 percent, just missing economists' forecasts of an uptick to 1.7 percent, while the measures of core inflation the Bank of Canada set a year ago remained muted.

For the year as a whole, pump prices were almost 16 per cent higher in April than they were in 2016.

Overall food prices were down 1.1 per cent as prices for fresh fruits fell 6.2 per cent, fresh vegetables slipped 5.9 per cent and meat dropped 2.1 per cent. "The easiest way to square this circle is that Canada is operating with a fair degree of economic slack, but absorbing it quickly", explains TD Bank economist James Marple.

Manitoba's annual inflation rate held steady at 1.6 per cent last month as higher costs for consumer items such as water and gasoline were offset by lower prices for things like fresh or frozen beef and children's clothing.

CPI median, which shows the median inflation rate across the various components, edged down at 1.6 percent, while CPI trim, which excludes upside and downside outliers, dipped to 1.3 percent.

Statistics Canada said the inflation rate was higher in three provinces, including Saskatchewan, which easily saw the biggest acceleration after it raised its provincial sales tax in late March.

Prices rose 0.4 percent on a monthly basis, lagging the 0.5 percent median economist forecast.

Total retail trade in March was almost $48.3 billion, thanks to stronger sales at motor vehicle and parts dealers, which was mostly due to an increase in new auto purchases, the report said. Market expectations were for a 1.7% increase in April, according to economists at Royal Bank of Canada.

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