Canada: Downbeat retail sales not enough to sink a January rate hike - TDS

Analysts at TDS note that Canada’s retail sales rose by 0.1% m/m in September, well below TD's on-consensus forecast for a 1.0% increase, though sales were revised higher for August.

Key Quotes

“Ex-auto sales were up 0.3% (TD: 1.1%, market: 1.0%) while volumes fell by 0.6% m/m to the detriment of GDPtracking.”

“This report will not be a game changer for the Bank of Canada who had already penciled in a slowdown in Q3 growth. Our latest tracking for Q3 is slightly below 2% and roughly in line with projections from the October MPR, and we expect a rebound in the fourth quarter.”

“FX: The downside miss in retail sales takes some of the momentum out of CAD but a soggy greenback, firmer oil prices and scope for a January BoC rate hike leave us looking for USDCAD to grind lower.”

“Rates: Front-end rates rallied 1-2 basis points on the release and the market pricing for a January rate hike edged slightly lower to 31%.”