Data released on Friday showed that Canadian GDP posted a 0.3% monthly increase in May, in line with forecasts. Analysts at CIBC pointed out that the economy had its ups and downs during the second quarter, but despite the monthly volatility, it appears that growth cooled a little more than the Bank of Canada had assumed in its July Monetary Policy Report (MPR).
Key quotes:
“With today’s data suggesting that growth was a little weaker than the Bank of Canada’s MPR projection in Q2, there is a clear risk that policymaker’s won’t hike interest rates one more time as we had previously anticipated.”
“However, because the slowdown in growth during Q2 was at least partly driven by supply side disruptions within public admin and the energy sector, we suspect that signs of continued loosening in the labour market and the trend in core inflation will be more important for the Bank as it determines whether to raise rates again or move back onto the sidelines. We will get more information on that front with the labour force survey next week.”
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