2017.12.2122:39:00UTC+00Strong Canada Inflation, Retail Sales Raise Bets for Rate Hike

Higher gasoline prices lifted Canada's November inflation rate to its highest level since the beginning of the year, while consumer spending was suddenly robust in October, boosting bets the central bank could hike interest rates early in the new year.

According to Statistics Canada, consumer level inflation rose at a year-on-year rate of 2.1 percent in November, from 1.4 percent in October.

It was the highest level since January and the first time inflation has reached the central bank's two percent target since February. Underlying inflation also accelerated, with two out of three of the Bank of Canada's core measures increasing on an annual basis.

Wagers in the markets of an increase in January climbed to 52.8 percent from 37.9 percent ahead of the data, while a March hike was nearly fully priced in.

Governor Stephen Poloz recently said the central bank is increasingly confident the economy will need less stimulus over time.

Consumer prices were up in seven of the eight main consumer price categories, led by a 5.9 percent annual increase in the transportation component as gasoline prices accelerated.

Food prices rose 1.6 percent as consumers paid more for meat and fresh vegetables.

Retail sales increased in October from the previous month by 1.5 percent to C$49.9 billion. The gain was driven by stronger sales at new car dealers. Excluding that volatile component, sales rose 0.8 percent.

A 3.3 percent increase in motor vehicle sales lifted retail sales. Vehicle sales have been strong this year, putting 2017 on course to reach two million for the first time.

Separate data from payrolls processor ADP showed companies added 59,200 workers to their payrolls in November on gains in education and health care.