Newspaper article The Canadian Press

Lower Than Expected Inflation, Weak Retail Sales Drops Canadian Dollar

Newspaper article The Canadian Press

Lower Than Expected Inflation, Weak Retail Sales Drops Canadian Dollar

Article excerpt

Annual inflation edges up to 0.9 per cent

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OTTAWA - Canada's inflation rate rose last month for the first time since July, climbing two-tenths of a point to 0.9 per cent as a trend toward lower gasoline and energy prices appeared to hit bottom.

Statistics Canada still noted, however, that consumer price pressures throughout the country remain well in hand, with only modest increases on the major goods and services that Canadians regularly depend on -- such as food, energy and shelter.

In fact, November was the seventh month in the past 13 where the official headline inflation reading came in below the Bank of Canada's desired broad range of between one and three per cent, and the 19th consecutive month it has been below the ideal target of two per cent. It was also lower than the one per cent economists had expected.

Coupled with a weak retail number, also released Friday by Statistics Canada, the two economic reports suggest the Canadian economy continues to experience weak growth, said analysts.

Markets sold down the loonie by 0.44 of a cent to 93.32 US shortly after release of the reports, which came out at the same time that the U.S. was announcing a revision to its third quarter growth performance to 4.1 per cent, the strongest in two years. By contrast, Canada's GDP advanced by 2.7 per cent in the same period.

"I think it was a combination of a couple of soggy Canadian numbers and a rip-roaring U.S. number. Actually I'm surprised the dollar didn't fall further," said Doug Porter, chief economist with the Bank of Montreal.

"A sliding dollar will eventually lift price pressures somewhat," he added, "but the bank will remain on alert unless and until growth picks up some steam."

Canada's central bank cited persistently low inflation for its decision in October to drop a longstanding bias in favour of tightening money supply, signalling that it likely intends to keep interest rates at super low levels well into 2015.

The central bank judges that the minimal pressure on prices for consumer goods and services is a sign that Canada's economy continues to have plenty of slack and will need another two years or so to return to full production capacity. …

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