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Retail sales in December fell the most since 2008 in real terms while prices for goods saw a price spike in January as economists say signs are emerging that higher prices are biting into Canadian real incomes.

Statistics Canada said Friday that retail sales were down 2.2 per cent in January, a much larger drop than the 0.9 per cent that economists had been predicting. When adjusting for the impact of pricing, sales were down 2.3 per cent, the sharpest drop since December 2008.

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And that’s not the worst of it: A quarter of respondents are already unable to cover their bills and almost a third said an interest rate hike could throw them into bankruptcy.





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Inflation data released at the same time showed that prices for goods in Canada have also been rising faster than expected. The Consumer Price Index (CPI) jumped two per cent year-over-year in January, higher than the 1.8 per cent that economists had been forecasting.