-- Consumers delivered another "solid" month in February, and early indications point to continued strength in March, but inflation jumped in March, suggesting some of the momentum is being driven by higher prices rather than broad-based demand growth, says Maria Soloviev at TD Economics on Friday following the release of the retail sales data for February.
Internal TD Spend data point to some softening in discretionary spending in March, she noted while looking at the key implications of Friday's release.
Higher energy prices will dent purchasing power, but TD does not expect this to materially weaken domestic demand beyond what's already embedded in its outlook, Soloviev said. Together with the drags from weak population growth and trade-related headwinds the economy is expected to grow at a below-trend pace this year, she added.
TD noted retail sales rose 0.7% month-on-month (m/m) in February, extending gains into a second month. This was below Statistics Canada's advance estimate for a 0.9% increase. In volume terms, activity increased a more modest 0.3% m/m, suggesting the headline gain was largely driven by prices.
Looking ahead, Statistics Canada's advance estimate points to a further 0.6% m/m increase in March.