Economists are looking to Friday’s economic data for another indication that the country’s poor performance in the first quarter was an anomaly, and that the economy has stabilized.
The first quarter saw an annualized 1.2 per cent GDP growth rate that fell short of expectations. The weakness in the economy was largely blamed on unseasonably bad weather.
Paul Ferley, an economist for the Royal Bank of Canada, says that Friday’s CPI and retail sales reports will provide clues as to whether the second-quarter economic rebound is sustainable.
“We’re getting signs that the economy has strengthened relative to a disappointing first quarter,” he said in an interview. Second quarter retail sales have so far grown by a 5-per-cent annualized rate, a big difference from the 1.2-per-cent rate in the first quarter.
“What’s going to be watched for is whether that higher growth can be sustained over the second half of the year.”
The consensus among economists is for inflation to increase 2.3 per cent, down from 2.4 per cent in June. Economists expect core inflation, which excludes the eight most volatile items, to increase by 1.9 per cent, up from 1.8 per cent the previous month.
Randall Bartlett, a senior economist for Toronto Dominion Bank, expects a slight pullback in inflation in part due to the price of wholesale meat.
“The price of meat has been a big driver of inflation,” he said in an interview, adding that it’s also included in the core numbers.
Mr. Bartlett noted a recent pullback in the price of meat, which had seen prices shoot up in the first half of the year. Consistently strong demand and supply shortages caused by a swine virus led to a 59.4-per-cent increase in pork futures between February and June.
The price of pork declined by 21.8 per cent in July, and fell further in August.
Mr. Bartlett expects inflation to increase by 2.1 per cent, compared to the 2.3-per-cent survey average.
Economists expect retail sales to increase 0.3 per cent, a smaller increase than the 0.7-per-cent increase in June.
Mr. Bartlett projects a 0.2-per-cent increase, and explains that the difference from the previous month is largely led by volatile auto numbers. “We’ve seen some unusually strong gains in the auto sector, and we’re expecting those to pull back in June.”
He said that excluding auto numbers would put the retail sales estimate at 0.5 per cent.
Mr. Ferley, whose estimate matches the consensus for retail sales, says that the anticipated numbers show that the economy is expected to grow at a steady rate.
“This is an economy unfolding in a reasonable way with solid growth and inflation looking like it’s fairly well anchored relative to the Bank of Canada’s target of 2 per cent.”
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