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CANADA: Analysts On Today’s GDP Data

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Mixed takes on the likelihood of the BoC upsizing to a 50bp cut in October after today's monthly GDP data. 

  • BMO: “Canadian real GDP growth is tracking below 1.5% in Q3, below potential and even below the modest pace of the past year. This means that even further slack is opening up in the economy, which will eventually put more downward pressure on inflation. […] Governor Macklem has stated that the Bank wants growth to pick up, and the trend does not seem to be cooperating, clearly raising the odds of more aggressive cuts—i.e., 50 bps in October.”
  • CIBC: “GDP growth in the third quarter is likely to be closer to 1 1/2%, which is well below the BoC’s forecast, as the economy isn't seeing the lift expected from goods-producing industries. For the BoC's October announcement, the upcoming employment report will be key in determining whether a 25bp or 50bp cut is necessary, with today's data not enough to sway us from our 25bp call at this point.”
  • Desjardins: “The acceleration in the pace of overall economic growth in July came despite wildfires restricting activity in parts of the country. That said, the pickup appears to have been ephemeral, with the flash estimate for August once again showing no increase. Growth appears to be tracking just over 1% for Q3, well below the BoC’s 2.8% forecast. As a result, we see central bankers lowering rates by 50 basis points in October.”
  • RBC: “Even with a tick higher in July, GDP is tracking another per-capita decline in Q3 and below the BoC's prior forecast. […] The case for additional interest rate cuts against that backdrop is clear - we continue to expect further gradual interest rate reductions (at a 25 basis point per meeting pace) down towards a 3% overnight rate with risks tilted to larger/faster cuts should the economy deteriorate significantly further.”
  • TD: “For what it's worth, we don't think today's data tips the scales any more-or-less in favour of a potential 50bps interest rate cut, which would follow the recent move from the Federal Reserve. Instead, more emphasis will be placed on upcoming labour market data as well as inflation data, where the Bank will be looking for signs that price growth can remain durably at 2%.“
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Mixed takes on the likelihood of the BoC upsizing to a 50bp cut in October after today's monthly GDP data. 

  • BMO: “Canadian real GDP growth is tracking below 1.5% in Q3, below potential and even below the modest pace of the past year. This means that even further slack is opening up in the economy, which will eventually put more downward pressure on inflation. […] Governor Macklem has stated that the Bank wants growth to pick up, and the trend does not seem to be cooperating, clearly raising the odds of more aggressive cuts—i.e., 50 bps in October.”
  • CIBC: “GDP growth in the third quarter is likely to be closer to 1 1/2%, which is well below the BoC’s forecast, as the economy isn't seeing the lift expected from goods-producing industries. For the BoC's October announcement, the upcoming employment report will be key in determining whether a 25bp or 50bp cut is necessary, with today's data not enough to sway us from our 25bp call at this point.”
  • Desjardins: “The acceleration in the pace of overall economic growth in July came despite wildfires restricting activity in parts of the country. That said, the pickup appears to have been ephemeral, with the flash estimate for August once again showing no increase. Growth appears to be tracking just over 1% for Q3, well below the BoC’s 2.8% forecast. As a result, we see central bankers lowering rates by 50 basis points in October.”
  • RBC: “Even with a tick higher in July, GDP is tracking another per-capita decline in Q3 and below the BoC's prior forecast. […] The case for additional interest rate cuts against that backdrop is clear - we continue to expect further gradual interest rate reductions (at a 25 basis point per meeting pace) down towards a 3% overnight rate with risks tilted to larger/faster cuts should the economy deteriorate significantly further.”
  • TD: “For what it's worth, we don't think today's data tips the scales any more-or-less in favour of a potential 50bps interest rate cut, which would follow the recent move from the Federal Reserve. Instead, more emphasis will be placed on upcoming labour market data as well as inflation data, where the Bank will be looking for signs that price growth can remain durably at 2%.“