Market Wire - Gas Prices Lift North American Data, Risk Appetite Continues to Rebound
Karl Schamotta - Chief Market Strategist, firstname.lastname@example.org
Canadian inflation accelerated last month. Data released by Statistics Canada this morning showed the Consumer Price Index rising +5.7 percent on a year-over-year basis in February, with the month-over-month change hitting +1.0 percent - beating consensus economic forecasts for a +0.9 percent gain.
Gasoline prices leapt 6.9 percent higher month-over-month, partially reflecting the war in Ukraine’s impact on global oil benchmarks.
Shelter costs rose at fastest pace since 1983, up +6.6 percent year-over-year. The homeowners' replacement cost index – a proxy for new home prices – climbed +13.2 percent relative to a year earlier, while the other owned accommodation expenses index, which includes commission fees on the sale of real estate, gained +14.3 percent. Mortgage interest costs were down -6.0 percent over the same period.
Core inflation, computed as the average of the three price measures preferred by the Bank of Canada (trim, median, and common), increased an annualized 3.47 percent, the highest since 1991. Core measures strip out highly-volatile categories, and are often used to develop a better understanding of price pressures in the underlying economy.
Price growth has now exceeded the Bank of Canada’s target range for eleven consecutive months, and the central bank is widely expected to hike rates again on April 13, with another five increases to follow over the course of the year.
On the other side of the 49th, soaring gas prices lifted US retail sales to a gain in February - but with highly-volatile categories excluded, sales slumped slightly from the prior month. According to figures published by the Census Bureau this morning, total sales at retail stores, online sellers and restaurants climbed by a seasonally adjusted +0.3 percent month-over-month, but with gas and motor vehicle sales excluded, receipts fell -0.4 percent. Markets were expecting a +0.4 percent headline gain.
However, a revision of January’s gain - from +3.8 percent to +4.9 - should more than offset the disappointment, providing more evidence of resilience in US consumer consumption patterns.
The dollar inched lower, and 10-year Treasury yields held steady. With coronavirus lockdowns rapidly spreading across the Chinese economy and investors increasingly convinced a ceasefire agreement will be struck in Ukraine, traders are broadly selling commodities and betting on risk sensitive currencies. This could prove short-lived however, with this afternoon’s Federal Reserve meeting set to determine short-term market direction.