WRAPUP 1-Canada retail sales slump, inflation holds steady

Fri Mar 20, 2015 10:03am EDT
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By Leah Schnurr

OTTAWA, March 20 (Reuters) - Canadian retail sales dropped more than expected in January due to lower prices at the gasoline pump, suggesting the economy may have had a weaker start to 2015 than anticipated.

Statistics Canada also said on Friday that the annual inflation rate in February was pressured by cheap gasoline as well, holding steady at 1 percent, matching expectations, and at the low end of the Bank of Canada's target range.

Analysts said inflation at that level is unlikely to push the central bank to make an interest-rate move, though the drop in retail sales makes the path of monetary policy less clear.

The 1.7 percent sales drop surpassed expectations for a 0.7 percent decline. In volume terms, sales dropped 1.2 percent.

"I think you spell 'ugly' with retail sales this month," said David Tulk, chief Canada macro strategist at TD Securities.

"The weakness in retail sets up industry level (gross domestic product) to contract, which puts the first quarter (growth) at risk of falling below 1 percent."

Low prices pulled gasoline sales down 8.8 percent, the largest decline since November 2008.

The Canadian dollar retreated against the greenback immediately following the two reports before recovering some gains.   Continued...