Synopsis:

CIBC highlights the resilience in US consumer spending and the mixed signals from Canadian inflation data. Both reports have implications for the Fed and BoC, with nuanced impacts on their respective rate outlooks.

Key Points:

• US Retail Sales:

  • Headline retail sales rose by 0.7% m/m, in line with strong holiday shopping expectations.
  • Core control group sales rose 0.4% m/m, indicating steady non-auto goods consumption.
  • Inflation-adjusted control group spending increased by 0.1% m/m.
  • Consumption growth in Q4 is tracking below 3% annualized, reflecting momentum from Q3.
  • Retail spending is stabilizing at pre-pandemic growth rates of 3.5-4.0% y/y, with durable strength in online shopping.
  • Fed Implication: The data aligns with expectations and won’t influence the Fed’s likely 25bp rate cut tomorrow. Forward guidance may introduce skips in the 2025 easing cycle.

• Canada CPI:

  • Headline CPI was flat m/m and eased to 1.9% y/y, slightly below consensus.
  • Black Friday discounts weighed on prices for clothing and furniture, while Taylor Swift concerts marginally boosted Ontario hotel prices.
  • Core inflation was mixed: ex-food/energy rose 0.1% SA m/m, while CPI-trim and median both increased by 0.3% SA m/m.
  • BoC Implication: Policymakers face challenges in interpreting inflation trends due to GST-related distortions starting mid-December. Labor market assessments will likely gain more weight in decision-making.

Conclusion:

US retail sales affirm consumer resilience but align with a cautious Fed easing path, while Canada’s inflation moderation highlights temporary factors and reinforces the BoC’s need for a nuanced policy approach.