Local Analyst Takes On Monthly GDP

CIBC notes risks to their prior non-consensus view of another rate hike ahead although await next week’s labour report.

• BMO: While the June handoff to Q3 is soft, we suspect that that weakness will reverse in the summer, as it was heavily concentrated in the whippy auto sector. The bigger picture is that growth is going to struggle to stay firmly in the positive column in 2H23, and we are likely to see more back-and-forth months like May and June resulting in very slow growth overall.
• CIBC: With today's data suggesting that growth was a little weaker than the BoC’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 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 whether the BoC raises rates again or moves back onto the sidelines.
• Desjardins: The sharp reversal in June reinforces our view that the BoC is done with rate hikes. Momentum is clearly slowing and the risks to the downside are growing.
• RBC: The resilience in consumer demand we’ve seen to-date is not to be overlooked, adding to sticky inflation pressures. But momentum in services spending also appears to be waning. The BoC won’t hesitate to hike further if necessary, but we maintain the view that the worst is yet to come for households with pressure from near-record high (and still rising) debt service expenses, keeping the BoC to the sideline over 2H23.
• TD: Today's reading points to some slowing momentum heading into the summer months. Since April, GDP data has been impacted by a series of transitory shock whose net effects make the data more difficult to interpret. Looking ahead, headline GDP figures may continue to be skewed by the government's grocery rebate and the effects of the B.C. port strike in July. All said, slowing growth appears to be in the cards for the Canadian economy, and we believe this will be enough for the BoC to remain on hold at its next meeting.