MNI DATA PREVIEW:Canada Q2 GDP Seen 2.5% Annualized vs Q1 5.6%

Canada's GDP likely slowed to a annualized 2.5% pace in the second quarter as new pandemic lockdowns took effect, with investors wondering if momentum will rebound as businesses balance reopening plans with delta concerns.

Economists also predict Statistics Canada's report at 830 EST Tuesday will show the quarter ended with monthly output climbing 0.7% in June following a 0.3% contraction in May. The agency may provide flash estimates of GDP for July and the third quarter, and preliminary readings on July GDP components like retail and manufacturing have been negative.

Some economists have penciled in Q3 growth around 6% reflecting the end of major restrictions on dining out and other social gatherings. While the housing market has faded from record highs, consumers have a big pile of cash saved up from government relief checks they can spend later this year. Exports have also been strong on higher oil prices and repaired supply chains.

Desjardins economists Jimmy Jean and Mikhael Deutsch-Heng say output may return to its pre-pandemic level in the next few months because "the Canadian economy has learned to cope with pandemic disruptions," though a full jobs recovery will take much longer.

The figures have implications for Liberal Prime Minister Justin Trudeau ahead of a Sept. 20 election where polls show he's now about tied with Conservative challenger Erin O'Toole in popular support in part because of complaints about high inflation. The BOC will also plug the figures into deliberations before its Sept. 8 rate decision, where it's expected to maintain QE worth CAD2 billion a week and a record low 0.25% policy rate as it anticipates a strong second half led by consumer spending.