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Inflation Edges Up and Retail Sales Rebound

Nov 23, 2018

The Conference Board of Canada’s Principal Economist, Alicia Macdonald offers the following perspectives on Stats Canada's consumer price index and retail sales data.


As shoppers head out for Black Friday, the latest retail data shows consumers increased their spending in September. Inflation also accelerated with consumer prices up 2.4 per cent in October, keeping the Bank of Canada on track to lift interest rates again in January.
—Alicia Macdonald, Principal Economist, The Conference Board of Canada.


  • After posting a gain of 2.2 per cent in September, inflation edged up last month with year-over-year price growth coming in at 2.4 per cent.
  • Mortgage interest costs continue to rise after the successive increases in interest rates over the past year and a half and are now up 7.0 per cent compared to last year.
  • The Bank of Canada’s core measure nudged up in October to an average of 2.0 per cent from 1.9 per cent in the previous month. CPI-common, the Bank’s preferred measure, held steady at 1.9 per cent.
  • This morning's retail data was positive on many fronts. Total sales were up 0.2 per cent in September. Excluding gasoline, sales were up by a stronger 0.4 per cent and in real terms, were up a robust 0.5 per cent.
  • Despite the solid September reading, real retail sales were down sharply in the third quarter due to weak growth earlier in the quarter. Real retail volumes grew at an annual pace of 1.7 per cent in the third quarter, compared to 3.6 per cent in the second quarter.
  • Decelerating consumer spending growth is not a surprise given slowing wage growth and higher debt servicing costs.
  • This morning’s data showed that core inflation remains at the Bank’s target. It also revealed that consumer spending is growing at a softer rate than last year but, nevertheless, remains healthy despite rising prices and higher debt servicing costs. With this data in line with our most recent Canadian Outlook and upside risk to our investment forecast after the measures introduced in the federal Fall Economic Statement, we maintain our call that the Bank will raise interest rates in January.

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