Canada retail sales jump in November, pointing to boost to weak economy

OTTAWA (Reuters) - Canadian retail sales jumped far more than expected in November on higher sales of new cars and Black Friday purchases, pointing to some much-needed vigor for a struggling economy.

Separate data showed the annual inflation rate rose in December as food prices surged, suggesting consumers were feeling the impact from the weaker Canadian dollar.

But analysts focused on the surprisingly strong retail figures, which raised optimism that fourth-quarter data will not be as weak as anticipated.

Sales rose 1.7 percent, Statistics Canada said on Friday, the biggest increase since June 2014 and topping forecasts for 0.2 percent. Volumes rose 1.5 percent.

Canada emerged from a mild recession in the third quarter, but lackluster activity and the drop in oil prices have prompted concern of another downturn. The Bank of Canada this week said the economy stalled in the fourth quarter.

"The retail data was very strong," said TD Securities senior rates strategist Andrew Kelvin. "It suggests that November was a stronger month for the Canadian economy than October was, and it will put some upside pressure on the (fourth-quarter gross domestic product) reading."

The Canadian dollar firmed slightly following the reports.

Sales increased in November across sectors, except for at gasoline stations due to lower prices at the pump.

Increased sales at new car dealers were the main contributor, up for the fifth consecutive month, due to the rising demand for new trucks.

Clothing, electronics, appliance and other stores typically associated with Black Friday discounts had higher sales.

Separately, the annual inflation rate rose to 1.6 percent, shy of expectations for an increase to 1.7 percent.

Core inflation, which strips out volatile items such as food and energy, slipped to 1.9 percent from 2.0 percent, its lowest since July 2014.

Analysts said the muted rate of inflation probably gave the Bank of Canada room to stay on hold and should calm some of the worst fears about widespread price pressure from the weaker loonie.

"I would say the Bank of Canada would breathe a bit of relief on that number," said BMO Capital Markets Chief Economist Doug Porter.

Rather than cutting rates again as some had expected, the central bank held them steady this week, noting a concern about the currency's sharp drop.

Canadians paid 3.7 percent more for food than in December 2014, as prices for fresh fruit and vegetables surged.

(Reporting by Leah Schnurr; Editing by Chizu Nomiyama and Lisa Von Ahn)

By Leah Schnurr