(March 21 – 12:30 ET) – It seems someone forgot to mention the recession to the Canadian consumer.

January’s retail sales data, released this morning, surprised on the upside with a 0.6% gain in the month, double the expected gain. Much of the gain came in auto sales, but the furniture stores, haberdashers and general merchandisers also enjoyed gains in January. The volume of retail sales jumped 1.1% in January, the biggest rise in six months.

BMO Nesbitt Burns says the report indicates, “There is no sign of real weakness yet for Canada’s consumers.”

This was confirmed by February’s Consumer Price Index, which also surprised on the high side of expectations. CPI was reported up 0.4% to 2.9% on the headline, but up a large 0.5% on the core rate to 2%. Excluding energy price, the CPI rose by 2.4% The core rate advanced more than the headline, so gas prices are not to blame this time around. Rising food prices prompted the increase.

Still, both BMO and CIBC World Markets agree that the report should not deter the Bank of Canada from continued rate cuts. “The hotter-than-expected monthly rise should do little to alter the bank’s path on monetary easing. It’s growth, not inflation that is top of mind for central bankers on both sides of the border,” says CIBC. “Governor Dodge reiterated yesterday that the bank sees core inflation continuing to hover near 2% in the latter half of the year — a call that is generally consistent with our own view for core CPI.”

CIBC says the CPI does nothing to move it from its call for another 50 basis point rate cut at the central bank’s April 17 meeting. BMO says, “While a bit higher than expected, today’s inflation report does not alter the fact that headline inflation has peaked, and it will not keep the Bank from cutting rates further.”