The annual pace of inflation edged higher in February as gains in most spending categories offset lower gasoline prices, Statistics Canada said Friday.
Statistics Canada reported the consumer price index in February climbed 1.5 per cent compared with a year ago. The move compared with a year-over-over increase of 1.4 per cent in January.
Helping push costs higher was a 8.1 per cent increase in mortgage interest costs and a 14.3 per cent rise compared with a year ago in the cost of fresh vegetables. The cost of passenger vehicle insurance premiums also rose 6.3 per cent.
The cost of gasoline was down 11.9 per cent compared with the same month last year as overall energy prices slipped 5.7 per cent.
However, Statistics Canada said tighter oil supplies and the temporary closure of several refineries for seasonal maintenance helped boost gasoline prices 1.9 per cent compared with January, the first month-over-month increase in gasoline since July 2018.
Excluding gasoline, the annual pace of inflation held steady at 2.1 per cent, the same as January.
The report also said the average of the Bank of Canada’s three core inflation readings, which omit more-volatile items such as gas, edged down to 1.8 per cent compared with a reading of 1.9 per cent in January.
Little need for a change in policy, economist says
James Marple, a senior economist at TD Economics said in a written statement that this slight increase “does little to change the broader picture of price growth that is neither too hot, nor too cold.”
He said core inflation has been modestly below two per cent since August last year.
“Its relative stability suggests little need for a change in policy in either direction,” Marple said. “If anything, the slight move down in the CPI-common measure reinforces the view that the Bank of Canada is likely to remain on hold, perhaps indefinitely.”
The central bank, which aims to keep inflation between one and three per cent, sets its benchmark interest rate target as a way to manage the pace of inflation. The Bank of Canada held its key rate target at 1.75 per cent at its rate announcement earlier this month, when it also raised concerns about the strength of economic growth to start the year.
In a separate report, Statistics Canada said Friday that retail sales fell 0.3 per cent to $50.1 billion in January, the third consecutive move lower as falling sales at motor vehicle and parts dealers weighed on the results.
Analysts had estimated a month-over-month increase of 0.4 per cent, according to Thomson Reuters Eikon.
Sales at motor vehicle and parts dealers fell 1.5 per cent in January due to a 2.4 per cent drop in sales at new car dealers and a 2.7 per cent drop at used car dealers. Excluding that sub-sector, retail sales increased 0.1 per cent.
Retail sales in volume terms were essentially unchanged in January.
Statistics Canada says the amount Canadians owe relative to their income ticked higher in the fourth quarter of last year as the growth in debt slightly outpaced income growth.
The agency says that seasonally adjusted household credit market debt, as a proportion of disposable income, increased to 178.5 per cent in the fourth quarter. That compared with a revised reading of 178.3 per cent in the third quarter.
That means there was roughly $1.79 in credit market debt for every dollar of household disposable income.
Credit market debt, which includes consumer credit and mortgage and non-mortgage loans, totalled nearly $2.21 trillion in the fourth quarter.
Mortgage debt reached nearly $1.44 trillion, while consumer credit and non-mortgage loans combined to total $769.4 billion.
The household debt service ratio, the total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, increased to 14.9 per cent in the quarter compared with revised reading of 14.7 per cent in the third quarter.
The pace of economic growth in Canada slowed in the third quarter as business investment spending moved lower and the growth in household spending slowed, Statistics Canada said Friday.
The Canadian economy grew at an annualized pace of two per cent in the third quarter compared with 2.9 per cent in the second quarter, matching the expectations of economists, according to Thomson Reuters Eikon.
The overall move came as spending on non-residential investment in buildings and engineering structures fell 1.3 per cent, as investment in the oil and gas sector slowed. Machinery and equipment investment by businesses fell 2.5 per cent.
Meanwhile, the growth in household spending slowed to 0.3 per cent in the quarter, compared with 0.6 per cent in the second quarter. The drop came as spending on durable goods fell 0.7 per cent, with spending on vehicle purchases falling 1.6 per cent.
Spending less on new homes, renovations
Total residential investment also fell 1.5 per cent as spending on new home construction fell 4.7 per cent, the largest decrease since the second quarter of 2009. Renovation spending fell 2.0 per cent, while ownership transfer costs rose 7.1 per cent.
The quarter ended on a weak note as real gross domestic product edged down 0.1 per cent in September. Statistics Canada noted it was the first move lower after seven consecutive months of growth.
The agency attributed September’s move lower to lower output across all goods-producing industries which slipped 0.7 per cent. Services industries edged up 0.2 per cent.
In its fall monetary policy report, the Bank of Canada had forecast growth at an annual rate of 1.8 per cent in the third quarter.
The Bank of Canada raised its key interest rate target in October to 1.75 per cent, its highest level in about a decade.
Economists generally do not expect the central bank change the rate at a scheduled announcement next week, but expectations are for another rate increase in January.
The head of Statistics Canada is assuring Canadians that their personal financial data is safe after days of Conservative criticism over the agency’s move to collect the financial transaction data from 500,000 people.
“I understand the concerns that Canadians have and want to assure them that their personal information is carefully protected, and never shared publicly,” Anil Arora, Chief Statistician of Canada, said in a statement.
Global News first revealed that Statistics Canada was asking banks across the country to provide the financial transaction data and personal details of Canadians without asking the people impacted for their permission beforehand.
“There were disturbing reports this weekend that Stats Canada has informed banks and credit card companies that it expects them to hand over personal financial data of at least half-a-million Canadians without their knowledge or consent,” Opposition House Leader Candice Bergen said Tuesday during question period.
“With the long history of government privacy breaches, Canadians are rightly worried. Why are the Liberals collecting the personal data of Canadians without telling them,” she added.
Prime Minister Justin Trudeau replied, saying his government was ensuring the personal data of Canadians is protected and will be used in an anonymous way that does not release any of the data for public consumption.
“High quality and timely data are critical to ensuring government programs remain relevant and effective for Canadians.”
Leveraging the best methods
In his statement Arora said his agency has a long history of working with sensitive date and they have the policies and practices in place to ensure this financial information is also protected.
“Traditional statistics-gathering methods are no longer sufficient to accurately measure Canada’s economy and societal changes,” Arora said.
“It is our duty to leverage the best methods and sources to provide facts to Canadians when they need it while providing the highest level of protection of privacy and confidentiality.”
The agency says three-quarters of all purchases are made online and Statistics Canada needs access to that information to provide data on the housing market, debt levels and the emergence of the gig economy.
“Throughout the planning of the pilot project, we have worked closely with the Office of the Privacy Commissioner and incorporated their recommendations into our design,” Arora said. “In fact, I have invited the privacy commissioner to provide us with any additional suggestions.”
Strength in the manufacturing sector helped the Canadian economy grow more than expected in July and boost expectations the Bank of Canada will raise its key interest rate next month.
Statistics Canada said Friday real gross domestic product grew by 0.2 per cent in July, an increase that followed essentially no change in June.
Economists had expected an increase of 0.1 per cent for July, according to Thomson Reuters Eikon.
Stephen Brown, senior Canada economist at Capital Economics, said the overall economy is on track for annualized growth of around two per cent in the second quarter.
“That would be stronger than the 1.5 per cent expected by the Bank of Canada in its July monetary policy report and is another reason to expect the bank to raise interest rates next month,” Brown wrote in a report.
Statistics Canada numbers show that after remaining flat in June, Canada’s economy grew 0.2% in July 2018. (Canadian Press)
Growing price pressures
The stronger-than-expected GDP figure follows signs of growing price pressures that have also raised expectations of higher interest rates. The annual inflation rate was 2.8 per cent in August, down from 3.0 per cent in July, but still at the top end of the Bank of Canada’s target range of one to three per cent.
The central bank kept its key interest rate target on hold at its rate announcement earlier this month, but most economists expect the central bank to raise the rate at its announcement on Oct. 24.
The Bank of Canada’s trend-setting interest rate sits at 1.5 per cent after four increases since the middle of last year.
The ducks are in a row for an October rate hike, barring a shock on the NAFTA front.– Doug Porter, Bank of Montreal chief economist
“On balance, the Canadian economy looks to have had a wee bit more underlying momentum than expected through the summer, and the ding from the Syncrude outage was not as deep as feared,” Bank of Montreal chief economist Doug Porter said.
“As we opined in the wake of last week’s solid core CPI (2.1 per cent on average), the ducks are in a row for an October rate hike, barring a shock on the NAFTA front.”
Economist Derek Holt with Scotiabank said he also expects a rate hike, referencing remarks made Thursday by Bank of Canada head Stephen Poloz.
“I think this reinforces Governor Poloz’s generally upbeat tone last evening and keeps us on track for an October hike,” said Holt.
TD senior economist Brian DePratto described the GDP numbers as, “not too shabby.”
“Economic growth may be set to moderate after the second quarter’s impressive performance, but we still look set for another above-trend quarter. “
Trade talks could hurt Canada
The Bank of Canada has said it is closely watching the NAFTA talks and other trade policy developments, which could hurt the Canadian economy.
Bank governor Stephen Poloz has said uncertainty over NAFTA has resulted in less business investment in Canada than there otherwise should be.
A welder fabricates a steel structure at an iron works facility in Ottawa March 5. Manufacturing sales increased 0.9 per cent in July to $58.6 billion, boosted by the transportation equipment and chemical industries, Statistics Canada says. The increase followed essentially no change in the country’s GDP in June. (Sean Kilpatrick/Canadian Press CANADIAN PRESS)
In its report Friday, Statistics Canada said goods-producing industries grew 0.3 per cent, while services-producing industries increased 0.2 per cent.
The agency said 12 of 20 sectors gained ground as the manufacturing sector grew 1.2 per cent in the month, its strongest showing since November 2017.
Wholesale trade grew 1.4 per cent, while transportation and warehousing services grew 0.9 per cent.
Meanwhile, the construction sector fell for the third time in four months as it moved down 0.6 per cent in the month.