Overall expectations remain muted
Canada’s economy grew slightly in July but its overall performance during the third quarter likely remained muted, according to the national statistics agency.
Statistics Canada said on Friday that real gross domestic product (GDP) had inched upwards by 0.2% in July, slightly bettering expectations, but that growth probably stalled in August.
A higher-than-anticipated July output arrived despite summer wildfires, which impacted industries including warehousing and rail transportation. Stronger performances in services-producing industries helped soften that blow as retail trade ticked upwards, although direct government administration continues to account for a significant portion of economic growth.
Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen noted early downside risk to StatCan’s early August projections, which are often “exceptionally revision prone” and due to be revisited in October.
He said GDP is facing a per-capita decline in 2024’s third quarter and a weaker overall performance than the Bank of Canada had expected, with unemployment rising and inflation falling.
The central bank has already lowered interest rates three times since June – and the latest economic figures show the case for more cuts is “clear,” according to Janzen.
He said RBC expects rates to fall gradually in 25-basis-point moves towards a 3% overnight rate, “with risks tilted to larger or faster cuts should the economy deteriorate significantly further.”
The Bank is scheduled to make its next decision on interest rates on October 23.
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