Photo by Ian Muttoo
According to statistics, Canada’s economy witnessed both unexpectedly soft retail sales in January and an increase in the leading indicator for February. The data thus suggested a mixed view of the economy’s development and strengthened anticipations that the Bank of Canada will be in no rush to raise interest rates.
Getting over the hurdle
Statistics Canada data showed that, from December, retail sales declined by 0.3 per cent in January, dragged down by lower sales at new car dealers. The result contrasted with the 1.0 per cent rise expected by analysts, as the market saw a decline for the second consecutive month in a row. The figures were also a reminder that the economy has not yet finished its recovery process after the global financial crisis.
Emanuella Enenajor, economist at CIBC World Markets, briefly commented on the situation: “Today’s retail sales report threw the first bucket of water on what otherwise appeared to be a blistering hot start to the new year.”
On the other hand, due to the growing manufacturing sector, the composite leading indicator went up by 0.8 per cent in February from January, according to Statistics Canada. The data surpassed expectations, since nine out of ten components of the leading indicator showed an increase, while only one declined.
The Canadian dollar responded to the mixed data by a slight decrease. The expectations of the Bank of Canada interest rate interventions were moderated by the new market figures. The bank has kept its current rate stable at 1.0 per cent since September last year, waiting for more evidence of the economy’s recovery.
