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Bank to remain on pause

Governor Tiff Macklem will probably be feeling happy with the initial stages of the recovery. While the second-quarter GDP data confirmed that output contracted by 39% annualised, that was at least better than the 44% drop expected by the Bank in its July Monetary Policy Report. Moreover, following the 6.5% m/m rise in GDP in June, Stats Can said its preliminary data point to a further 3% rise in July. (See Chart 1.) That puts the economy on track for a 45% expansion in the third quarter, which is also stronger than the Bank’s forecast, of 32%. In all, the data support our forecast that GDP will fall by 6% this year, less than the Bank’s forecast of a 7.8% drop.

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