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Canada's Economy Seen Growing 0.1% in May, BoC to Stay on Hold, CIBC Says

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Canadian economic activity is expected to have grown 0.1% month over month in May, continuing the recovery seen in April but at a more moderate pace, according to CIBC Economics in a note.

May's growth was likely supported by continued strength in retail trade and real estate activity, partly offset by a decline in wholesale activity, said CIBC in a Friday note. Statistics Canada will release May and preliminary June GDP data on Friday.

Looking ahead, firmer retail sales and a temporary boost to select service industries from the soccer FIFA World Cup are expected to support stronger growth in June, leaving second-quarter GDP growth tracking slightly above an annualized 2.5% pace, added CIBC.

However, while the economy is expected to deliver a strong rebound in Q2, the bank anticipates growth will moderate in the second half of the year as temporary Q2 supports fade and the risk of new US tariffs weighs on activity.

Alongside subdued core inflation, this outlook should allow the Bank of Canada to remain on hold despite the recent increase in global oil prices, said CIBC.

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