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Statistics Canada today announced that wholesale sales rose 2.3% in May to CAD50.3 billion, hitting its strongest pace since early 2011, with much of the increase being driven by higher sales in the agricultural supplies and food sectors. Analysts polled by Bloomberg had given a median estimate of an increase of just 0.3%. The number for April’s wholesale sales was also revised up to 0.4% from an earlier estimate of 0.2%.
The strength of this report has caused a slight rethink in the prospects for Canadian growth. Just yesterday, with the Bank of Canada’s latest policy decision, new Governor Stephen Poloz suggested subdued inflation and softness in the economy was staying his hand in hiking rates.
The central bank’s statement said, ‘As long as there is significant slack in the Canadian economy, the inflation outlook remains muted, and imbalances in the household sector continue to evolve constructively, the considerable monetary policy stimulus currently in place will remain appropriate.’ The statement was broadly in line with the way policy had been communicated under Mark Carney, suggesting a bias to tightening, although reference to the persistent strength of the Canadian dollar was notably absent.
The Bank of Canada remains the only G7 central bank with a hawkish bias, and today’s report, suggests the slack in the Canadian economy may not be around for as long as previously thought.
USD/CAD fell 0.2% to 1.0384 by mid-afternoon in New York, while the Loonie gained more than 1% against the Japanese yen.