Analysts at CIBC point out that recent swings in Canadian monthly GDP have been driven mainly by supply disruptions, such as wildfires and the port strike, which means that weak growth readings may not necessarily translate into lower inflationary pressures in the near term
Latest monthly GDP data suggested that the Canadian economy barely awoke from its Q2 slumber in the third quarter. The flat reading for July, combined with an advance estimate for a mere 0.1% advance in August, leaves Q3 GDP tracking below a 0.5% annualized pace.
While supply constraints related to wildfires and the BC port strike have handcuffed activity recently, there are also signs that domestic demand is not particularly strong which could be enough to keep the Bank of Canada on hold despite recently higher-than-expected inflation readings.
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