Canada December Retail Sales Up 2.5%, Beating Market Expectations

• Canada's retail sales grew by a robust 2.5% on a monthly basis in December, beating analysts' expectations, as a sales tax holiday bumped up spending on food and beverages. People also bought cars and vehicle parts, data showed last Friday.
• Retail sales are considered an early indicator of GDP growth and contribute almost 40.0% to total consumer spending, which was primarily responsible for keeping Canada's economy growing in the third quarter. Economists said the government's sales tax break, which kicked off in mid-December and ended February 15, also boosted revenues.
• Analysts polled by Reuters had forecast retail sales would rise by 1.6% on a month-on-month basis and by 1.8% excluding automotive and parts sales. Retail sales jumped by 2.5% even after sales of automotive parts and at dealerships were excluded, Statistics Canada said.
• "Even if the momentum of retail sales fades into the new year, these figures add to the argument for the Bank of Canada to pause at next month's meeting," Shelly Kaushik, senior economist at BMO Capital Markets, wrote in a note.
• Currency swap markets now see a more than 68.0% chance of no rate cut on March 12, although economists have said expectations for the trajectory of interest rates could change if U.S. President Donald Trump slaps a 25% tariff on Canadian imports in March.

(Source: Reuters)