BOE: What has driven the changes in BOE CPI forecasts?

September saw 8.3% Y/Y retail sales growth per the Johnson Redbook index, with an 8.6% rise in the final week (ending Oct 3). While short of retailers' targeted 8.5% rise and a deceleration from 8.7% in August, it was the 5th consecutive month of 8+% growth.

• Early consensus for September's Census Bureau retail sales out next week is for 0.2% overall M/M growth (roughly 5.4% Y/Y, same as August), with 0.3% control group (4.8% Y/Y after 4.5%) and 0.4% ex-autos (6.4% Y/Y after 6.2%).
• Those are suggestive of expectations for weak auto sales (in line with a contraction in light vehicle sales volumes in September), but strong gasoline sales (the AAA estimates the national average for a gallon of regular gasoline was up 5-6% M/M) and solid "core" sales in the control group.
• We'll have a better steer Thursday after the Chicago Fed's CARTS retail sales estimates for September are released.
• Redbook's initial target for October sales growth is 8.2%, and the report also reminds us that Amazon sales loom large: "Since Amazon's Prime Big Deal Days are taking place on October 6th and 7th, major retailers are also launching large promotional campaigns in order to compete with Prime Day, offering early access and deeper discounts. In some cases, sales run longer than Amazon's two-day event. Moreover, shoppers are not required to be Prime members in order to purchase things."

The pro-independence Parti Québécois (PQ) secured a significant political comeback in the provincial elections to the National Assembly of Quebec, which took place on 5 October. Having held just seven seats prior to the election, the PQ, under leader Paul St-Pierre Plamondon, won an additional 52 seats, giving it 59 in the 127-member legislature, five short of the majority threshold. While the PQ were the clear 'winners' of the election, the centrist Quebec Liberal Party (up 19 seats to 40) and the right-wing Conservative Party of Quebec (entering the legislature with 19 seats) can also view the election as a success.

• The clear 'loser' was the centre-right Quebec nationalist Coalition Avenir Québec (CAQ) of Premier Christine Frechette. The CAQ, which had governed for two terms under Francois Legault until his resignation in April, lost all 79 of the seats it held prior to dissolution. It won just 13.4% of the vote, down from 41.0% in 2022.
• A key focus post-election will be on the PQ's long-standing policy objective of holding a referendum on whether Quebec should secede from Canada. Following the election, the PQ's most likely ally in securing a second referendum following the 1995 vote (won by the 'no' side by a razor-thin 50.6%-49.4% margin), is the far-left Quebec sovereigntist Quebec solidaire (QS) which won nine seats (down two). Both the Liberals and Conservatives are opposed to Quebecois independence. 

Chart 1. National Assembly of Quebec, Seats

• St-Pierre Plamondon has said that he would not look to bring forwards an independence referendum until 2029 or 2030, once US President Donald Trump is out of the White House to allow what he calls a "serene" debate on Quebec's future. However, as the CBC notes, "minority governments in Quebec typically last less than two years", meaning the PQ administration will have to prove more durable than previous gov'ts in order to reach the stage at which a referendum could take place.
• The latest polling on the prospect of Quebec independence from May shows around two-thirds of respondents opposed to the prospect, indicating the success for PQ may be down more to voters desire to oust the CAQ rather than signal support for an independent Quebec.
• Canadian PM Mark Carney said, following the election that “Building a stronger Québec is core to our mission of building a stronger Canada,” and that the federal and provincial gov'ts should work together to support workers and industries affected by US tariffs, and accelerate house building.
• The rise of the separatist PQ could present something of a headache for Carney and the federal gov't. A provincial gov't in Quebec that is more willing to take a combative stance against Ottawa could prove a sizeable distraction for the Carney administration as it seeks to present a united front against the US' trade agenda.