Canada: Headline GDP Gains Continue, but So Does Per Capita Weakness July 31, 2024

Our outlook for remains less optimistic than the 's, in large part because of differences in the forecast trajectory for population growth. In our view, the balance of risks tilts more towards weaker growth and more motivation for the Bank to cut rates. Recall that the July 2024 External link. penciled in an optimistic 2.8% annualized expansion for Q3 2024. That reflected still-strong headcount gains driving consumer and housing demand, with additional support from strong exports via increased pipeline capacity from . In contrast, our forecast incorporates recent softness in the labour market and other key indicators such as retail sales and wholesale trade. We also assume population growth will slow meaningfullyExternal link. over the coming quarters as Ottawa's planned temporary resident cuts take effect.

In all, solid headline gains don't change our call that the will cut its policy rate again in September. Following ongoing labour market softness, the continued easing of price pressures and increasingly dovish language in last week's , more per-person economic weakness adds to the case for additional monetary easing.