Canada: Q2 GDP rebound faces future headwinds – RBC

Royal Bank of Canada economists Nathan Janzen and Abbey Xu expect Canadian gross domestic product data for June and Q2 to confirm a strong rebound after winter stagnation. Monthly GDP is tracking above 3% annualized, supported by firmer labour markets, stronger consumer spending, and improved business and residential investment, though they warn that auto-led trade gains and demographic and trade headwinds will limit future growth.

Q2 strength and sustainability risks

"Next Friday’s Canadian gross domestic product reports for June and Q2 are expected to confirm a strong rebound in economic activity following stalling growth over the winter."

"We expect a 0.2% increase in June, in line with Statistics Canada’s earlier advance estimate to add to an almost full percentage point increase over April and May."

"Monthly numbers have been highly revision prone, but track above 3% annualized growth in Q2 overall."

"Net trade likely made a substantial positive contribution as exports outpaced imports, led in part by a recovery in the auto sector following winter production disruptions."

"The boost from auto production and net trade in Q2 is unlikely to be repeated in coming quarters."

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