Data released on Friday showed retail sales in Canada fell 0.1% in November, an improvement from the preliminary estimate of a 0.5% drop. CIBC Analysts They point out that some of the details weren’t so encouraging, and that the underlying trend continues to show retail sales moving broadly sideways in volume terms. They expect the Bank of Canada to raise interest rates by 25 basis points next week.
“On a more positive note, the forward estimate for December showed a global sales increase of 0.5%, which should be even better in volume terms, given the sharp drop in gasoline prices seen during the month. So, taken together, the two months suggest that Canadian retail sales are still in a patch, but at least it’s a patch that’s more sideways than down.”
“Retail sales in terms of volume are not increasing but not falling either, suggesting that savings accumulated during the pandemic may be shielding consumption to some extent from the impact of rising interest rates. However, given that the saving is no longer as inflated as before, especially in inflation-adjusted terms, and with rates rising further, household consumption could still see some modest declines in the first half of 2023. We continue to see one last rise of 25 basis points from the Bank of Canada next week”.
Source: Fx Street
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