Two reports from Statistics Canada this week will give the latest sense of how rising gasoline costs could affect consumer spending in the months ahead.
Canada is not seeing the increases that the United States is experiencing, where a 17 per cent gain in pump prices this year is nipping at consumer confidence and squeezing household budgets just as Americans are starting to spend more again.
Still, if the roughly 3 per cent monthly price increases that Canadian drivers saw in January and February persist, the ability of consumers on this side of the border to pay for discretionary items is bound to take a hit – especially when you consider how much families are borrowing to buy big-ticket items such as houses and cars.
Statscan will report retail sales figures for January on Thursday, and inflation data for February on Friday.
Economists say January retail sales probably rose a healthy-looking 1.7 per cent, thanks to a 15.6 per cent monthly surge in car and truck sales, plus the increase in gas prices. However, they estimate sales excluding autos rose as little as 0.3 per cent. (According to Doug Porter, deputy chief economist at BMO Nesbitt Burns, the non-autos number would have been flat without the higher gas prices.)
On the inflation front, gas prices likely pushed Statscan's "headline" reading for annual inflation up to 2.6 per cent, while the core measure that strips out energy and some food items rose to as high as 2.4 per cent. That would be its highest reading in almost three years, but economists note that price gains were tame in February, 2011, so any price gains last month are from a low base.
Neither report will have much bearing on the Bank of Canada's timeline for raising interest rates, unless they're wildly off Bay Street analysts' expectations.
Despite signs that the global economy is stabilizing and the U.S. recovery is gathering steam, Governor Mark Carney has demonstrated he is cautious enough to make sure any flurry of good (or bad) economic news represents a durable trend before tinkering with borrowing costs. He has stressed repeatedly that his mandate gives him the flexibility to take longer than usual to bring inflation back to his 2-per-cent target when the economy is facing "headwinds," such as the strong Canadian dollar and, further down the road, the tough fiscal restraint in the U.S. that could come after the November elections.
In Mr. Carney's last rate decision, he hinted that progress around the world could be snuffed out if geopolitical tensions (read: Iran) keep pushing energy prices higher.
The same could be true for the domestic consumer demand that he is counting on for about half of Canada's growth this year.