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Analysts Little Swayed By Stronger Than Expected Monthly GDP Growth

CANADA DATA
  • BMO: “Make no mistake, the Canadian economy is paddling fast just to keep its head above water, but it is still managing to slowly move forward. All told, these latest GDP figures should tamp down talk of the Bank being wildly behind the curve, and quiet rumblings about the BoC potentially looking at a 50 bp cut. (Such a rapid step-up in easing would require extremely weak data and/or much milder core inflation.) Canada's economy is still walking that fine line of struggling to keep upright, but just staying out of serious trouble, consistent with continued, measured interest rate cuts.”
  • CIBC: “Today's data don't cry out for a change in that view given that these industry level data don't exactly line with the quarterly expenditure data. Q3 growth might be top our prior call, but still seems likely to fall short of the BoC’s optimistic take. None of that alters our call for another quarter point rate cut by the BoC in September, with that decision being much more tied to the progress we've seen on underlying inflation measures.”
  • Desjardins: “The latest GDP report provided slightly better news than economists were expecting, but it won’t be enough to assuage the BoC’s concerns about downside risks to the economy. In fact, when measured in per capita terms, the second quarter advance in GDP still looked quite weak. As a result, we don’t think this data will derail a third consecutive rate cut in September.”
  • RBC: “We think the economic backdrop should give the BoC room to deliver another interest rate cut in their next meeting in September. We expect a total of 100 basis points of cuts to the overnight rate this year (including the 50 basis points cuts already delivered in June and July).”
  • TD: “GDP readings of late have been relatively stable, allowing the BoC to keep its focus more squarely on the evolution of inflation, especially with the start of its interest rate easing cycle well underway. With two interest rate cuts under its belt–and likely a couple more this year–we'd expect the growth backdrop to continue to be supported. The BoC is particularly upbeat about third quarter growth (2.8% q/q annualized), but we expect the weight of still-high interest rates to result in more trend-like growth next quarter.”
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