The inflation effect was expected in March and is going to carry through to April with the CPI showing goods prices rising a cumulative 1.8% (seasonally adjusted) through these two months, noted TD Economics following the release of the latest Canadian retail sales data.
"The sinking volumes figures suggest consumers are already cutting back, as higher energy prices eat into budgets," the bank said.
TD's outlook is that private domestic demand, and particularly consumer demand, will be subdued in the second quarter, largely due to significantly higher energy prices. Provided energy prices begin falling in June, this should provide some relief and help private domestic demand gain traction in the second half of 2026, the bank said. For the Bank of Canada, the current slack in the economy should allow them to look through the initial energy shock and wait for more clarity on how pervasive inflation pressures are becoming, it added.