Canadian economic recovery still weak, data shows

Wed Jan 20, 2010 10:57am EST
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By Louise Egan

OTTAWA (Reuters) - Canada's economic recovery remained choppy in the fourth quarter, according to data that revealed a lack of inflationary pressure in December and a still-struggling manufacturing sector in November.

Higher gasoline prices pushed the annual inflation rate to a 10-month high in December, Statistics Canada said on Wednesday. But the rate was below market forecasts and at the lower end of the Bank of Canada's target range of 1 percent to 3 percent.

In November, manufacturing sales disappointed with a scant 0.1 percent advance, compared with expectations for a 0.6 percent increase.

The figures are unlikely to change the central bank's pledge to keep interest rates at record lows until at least the end of June this year.

"Today's data is largely in keeping with the somewhat saw-toothed nature of this recovery that has dished out its fair share of economic disappointment on a month to month basis," said Stewart Hall, markets strategist with HSBC Canada.

Annual inflation was at 1.3 percent, its highest level since 1.4 percent in February 2009, due largely to the effect of a steep decline in gasoline prices in December 2008. In November, annual inflation was 1.0 percent.

The consumer price index slipped 0.3 percent in December from November. Analysts had forecast a monthly decline of 0.2 percent in the CPI and a 12-month inflation rate of 1.5 percent.

"The weakness in the data takes any kind of pressure off the Bank of Canada to potentially act sooner rather than later, so I think from a shorter term perspective we might see a little more Canadian dollar weakness in reaction to that," said George Davis, chief technical strategist at RBC Capital.   Continued...