Statistics Canada reported that retail sales were up slightly in May, countering a slight decline in April. Overall, retail sales were up about 1%. (See http://www.statcan.gc.ca/daily-quotidien/090722/dq090722a-eng.htm for the complete news release.) This will likely send some retail-related stocks higher for a short period.
Retails sales should not be confused with Gross Domestic Product, which is the total value of all output for the Canadian economy, including exports.
It is important to note the increase in retail sales will produce neutral results for the next 6 months. As a result, it is likely that the Bank of Canada will hold its overnight lending rate at the current level until 2010. The Bank eluded to this in their recent policy announcement on Tuesday of this week, stating that if the economy keeps tracking the way it is, that they will keep their rate the same until Spring 2010. (See http://www.bankofcanada.ca/en/fixed-dates/2009/rate_210709.html for the press release.)
The wild-card in all this is inflation. Inflation is driven by a number of factors, and as inflation rises, or the expectation for inflation builds, so to will mortgage rates. Be prepared for steadily increasing interest rates starting in 2010. With fixed rates where they are today, fixed-rate mortgages are a good option for some. Variable-rate mortgage shouldn't be overlooked as there are immediate interest savings for at least the next year.
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