WRAPUP 2-Weak Canada inflation, retail data darken growth outlook

Fri Feb 22, 2013 2:35pm EST
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* Annual inflation 0.5 pct in Jan, down from 0.8 pct in Dec

* Retail trade drops 2.1 pct in Dec from Nov

* Both figures are weakest in about three years

* Expectations soften for GDP and for rate increase

By Randall Palmer and David Ljunggren

OTTAWA, Feb 22 (Reuters) - Canada's economy registered its lowest inflation in more than three years in January and the largest decline in retail sales in almost three years in December, a double whammy that weakened the currency and darkened the country's growth outlook.

Friday's Statistics Canada reports prompted several economists to water down forecasts for December and fourth-quarter gross domestic product data, which is due March 1 .

They also pushed out expectations for the next Bank of Canada interest rate increase and raised the possibility that the central bank could tone down its policy-tightening language further than it has already in the past few months.

"This combination of data just piles on what had already been a weak footing for the Canadian dollar," BMO Capital Markets chief economist Doug Porter said. "Both numbers came in below already weak expectations. Obviously the real eye-opener here was the retail sales result."   Continued...