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Canada's Economic Potential Under Pressure, Says BMO

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Canada's economy has lost both of its long-run growth drivers, said Bank of Montreal (BMO).

Alongside the recent historic decline in the population comes news that productivity continued to sag early this year, noted the bank.

Business-sector labor productivity fell 0.5% quarter over quarter in Q1 and is down 0.6% in the past year, extending a multi-year stretch of weakness, pointed out BMO after Wednesday's data.

By sharp contrast, United States productivity is up 2.9% year over year, faster than usual, stated the bank.

Since Q3 2022 -- around the introduction of ChatGPT -- labor productivity has risen more than 9% in the U.S., but not at all in Canada, added BMO. If chatbots are boosting productivity, there is no evidence of such in Canada.

With tight immigration curbs in place for two more years, productivity will need to improve to support growth in Canada, according to the bank.

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SocGen's Overnight Economic News Summary

Societe Generale in its early Thursday economic news summary pointed out:Brent softer after Israel/Lebanon ceasefire contingent on a cessation of Hezbollah fighting and the removal of Hezbollah operatives from southern Lebanon. The United States House voted 215-208 to halt the Iran war, breaking with President Trump amid dissent.Fed's Logan (voter): I am increasingly concerned that higher interest rates could be necessary later this year to fully restore price stability and appropriately balance both sides of the Fed's dual mandate.Switzerland's consumer price index unchanged at 0.6% year over year in May, in line with SNB Q2 forecast. Core steady at 0.3% year over year, services 1.1%, goods -0.2%.Sweden's CPI rose to 0.8% year over year in May from -0.1% in April, headline CPIF picked up to 1.5% from 0.8% (Riksbank forecast 1.57%) and excluding energy firmed to 0.5% year over year from 0.0%.Day ahead: U.S. weekly jobless claims, Challenger job cuts. Fed speakers Barkin and Daly. European Central Bank's Lagarde (pre-rate decision quiet period). Eurozone retail sales. Bank of England's Bailey. France benchmark auction. Czech Republic's CPI.Nikkei -1.6%, EUR 10-year IRS -1.5bps at 3.055%, Brent crude -0.9% at US$96.9/barrel, Gold +0.7% at US$4,466/oz.

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