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Four Analysts All Noting GDP Strength But Still Seeing BoC On Hold Next Week [2/2]

CANADA
  • RBC: The jump in GDP early in Q2 means output is potentially running substantially above prior expectations. Labour markets have remained very firm, and inflation also surprised on the upside in April. There are still early signs that cracks are forming in the economic backdrop - job vacancies are declining, consumer delinquency rates are edging higher and households are saving less. And headwinds from higher interest rates will continue to build. But the economy's resilience will put pressure on the BoC to raise interest rates further. Governing Council will actively discuss a hike next week, but we think they'll wait until July to see if more evidence accumulates in favour of a hike.
  • TD: Canada's economy bounced back in a meaningful way in Q1. Growth was driven by an acceleration in consumer spending, supported by a record-breaking increase in employment and wage growth that now outpaces inflation. Today's report might not force the BoC off the sidelines next week, but it may be used as rationale for a hike later this summer. Thus far, the BoC's rhetoric has focused on its expectation for a quick deceleration in economic growth over the remainder of the year. That slowdown still seems likely, but if the data keep coming in hot, the BoC may be compelled to move once again.
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