Canada Core Retail Sales Rebound with 0.5% Growth in August

Canada Core Retail Sales Rebound with 0.5% Growth in August
October 22, 2020

 

The pound rose against its peers yesterday, including the Canadian dollar, in the hopes of a potential Brexit trade agreement between the UK and the EU. However, the series of economic data (CPI, PPI, public sector net borrowing) reported by the UK Office for National Statistics (ONS) was mixed. Likewise, the retail sales and CPI data published by Statistics Canada was also unimpressive. Eventually, the hopes of a Brexit deal propelled the GBP/CAD pair from a low of 1.6960 to a high of 1.7270 in the past 24 hours.

According to the ONS, consumer price inflation rose 0.5% y-o-y in September, following an increase of 0.2% in the earlier month and greater than the 0.4% growth anticipated by economists.

Likewise, the “Consumer Prices Index, including owner-occupiers’ housing costs (CPIH) 12-month inflation rate,” was also increased slightly to 0.7% in September, from 0.5% in the prior month.

With an upward contribution of 0.23%, the transport sector led the rise in CPIH 12-month inflation rate between August and September. Within transport, airfares contributed over 50% of the growth. With a downward contribution of 0.05%, furniture, household equipment and maintenance led the drop in CPIH 12-month inflation rate between August and September.

Between August and September, both CPIH and CPI increased 0.4%, compared with an increase of 0.1% during the comparable period last year.

Barring volatile goods, core consumer price inflation increased 1.3% y-o-y in September, from 0.9% in August and in line with economists’ estimates.

The ONS also stated that the retail price index (RPI) increased 1.1% y-o-y in September, from 0.5% in the earlier month, but a notch lower than the 1.2% growth anticipated by economists.

In a separate news release, the ONS stated that public net borrowing increased to £35.40 billion in September, from £29.40 billion in August. Economists had anticipated the government to borrow £32.50 billion in September.

Excluding public sector banks, public sector net borrowing was £36.1 billion in September, an increase of £28.4 billion from September 2019. The figure reflects the third-highest borrowing in any month since the institution starts publishing data in 1993.

In the first six months of the financial year (ended September 2020), Public debt increased £259.2 billion to £2,059.7 billion, or roughly 103.5% of gross domestic product (GDP). The reported figure represents the highest debt to GDP ratio since the financial year ending (FYE) 1960. The public sector borrowing was £208.5 billion in the current financial year-to-September, up £174.5 billion from the same period last year.

Data published by the ONS indicated that the producer price-output decreased 0.1% m-o-m in September, following an increase of 0.1% in the earlier month, but in line with economists’ estimates.

On a y-o-y basis, inflation for goods moving out of the factory stood at -0.9%, unaltered from June 2020. The inflation rate has been negative for the sixth month in a row, following 45 months of positive annual inflation (July 2016-March 2020).

Only three product groups out of 10 contributed negatively to the output annual rate. With a price decline of 19.7% in the year ended September, Petroleum products made a downward contribution of 1.58%. With an increase of 2.8%, tobacco and alcohol provided the largest upward contribution of 0.28%.

The monthly rate for fuels and other materials bought by manufacturers (producer price input) rose by 1.1% in September, from -0.2% in August. Economists had anticipated a decline in the PPI input to negative 0.9%. Notably, the monthly rate has been in the positive region since May 2020

The monthly rate for materials and fuels purchased by manufacturers was 1.1% in September 2020, after decreasing 0.2% in August 2020. The monthly rate has been positive since May 2020, barring August, which registered a small decrease.

On a y-o-y basis, the inflation of fuels and materials bought by manufacturers declined 3.7% in September, after falling 5.6% in August. Four out of nine product groups contributed negatively to the input annual rate. With a decline of 34.1%, crude oil made a negative 5.91% contribution. On the contrary, with a price rise of 18.6%, imported metals made the largest upward contribution of 1.72%.

During the US session, data provided by Statistics Canada indicated that the Consumer Price Index (CPI) declined 0.1% m-o-m in September, following a decrease of 0.1% in the earlier month and in line with economists’ estimates.

Excluding volatile goods, core CPI increased 0.1% m-o-m in September, after remaining unchanged in the earlier month.

On a y-o-y basis, the consumer price index increased 0.5% in September, following an increase of 0.1% in August.

In July, total investment in building construction rose 1.8% to $15.10 billion in July. While residential sector investment rose by 4.9% to $9.90 billion, non-residential sector investment fell 3.7% to $5.30 billion. Construction activity, despite a rebound in the past few months, still remains below the pre-pandemic February levels.

Data published by Statistics Canada indicated that retail sales increased 0.4% m-o-m in August, following a growth of 0.6% in July, but lower than the 1% increase anticipated by economists. It is the fourth successive monthly increase since the steep drop recorded in April. In value terms, retail sales increased to $53.20 in August. Excluding volatile goods, core retail sales rebounded with a growth of 0.5% in August, after recording a 0.4% drop in the earlier month. Economists had anticipated a retail sales growth of 0.9%.

Retail sales volumes increased 0.5% in August. Food and beverage store sales increased 0.8% in August, following a decline of 2.1% in July. However, sales at clothing and accessories stores remained 11.8% below pre-pandemic February levels.

Sporting goods, music, book and hobby recorded a 3.7% decline in retail sales. Retail e-commerce sales, on an unadjusted basis, hit $2.80 billion in August, reflecting 5% of total retail trade.

The mixed economic data from both the UK and Canada is expected to keep the GBP/CAD pair range-bound with a bullish bias.

The historical price chart indicates that the GBP/CAD pair is ascending after testing the support at 1.6960. The next resistance is anticipated only near 1.7450. Additionally, the momentum indicator is also rising. Therefore, we are anticipating the currency pair to move up in the short-term.

GBP - technical analysis - 22nd October 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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