BoC’s growth forecast for Q3 face significant risk

Retail sales volumes were up by a somewhat mild 0.2% m/m. Housing starts were sharply higher at 216,900 from 193,300 the prior month. The fact that this was led by a roughly 20% m/m rise in multi-housing units that carry less value-added in construction will restrain how this translates into the construction sector within the GDP industry add-up, but single family housing units were also higher by 1.4%. 

A positive print for July GDP would further reinforce the understanding that the economy is turning higher into the third quarter. The economy ended Q2 on a positive note with a fairly robust GDP gain of 0.5% m/m. 

"That carried momentum into Q3 which has Q3 tracking at about 1% annualized growth from which upsides are assumed in ways that could turn out to make the BoC's 1.5%  growth forecast for the third quarter face significant risk of being too light. A challenge going forward will be how to weed out and sort through the effects of ongoing distortions such as a temporary growth spurt in auto output, and recurring disruptions to energy sector output", says Scotiabank in a research note.