09:18 AM EDT, 07/31/2024 (MT Newswires) -- While the Canadian gross domestic product (GDP) increase of 0.2% m/m in May was one tick higher than expected, Wednesday's data was still a slowdown from the 0.3% m/m advance in April, noted Desjardins.

Growth in May was largely due to the continuing rebound in the manufacturing sector and the opening of the TMX oil pipeline, said the bank. The retail industry was the largest drag, as consumers continued to pull back.

Statistics Canada's flash estimate for June revealed a further deceleration in growth. The advance estimate saw GDP rise just 0.1% m/m. While that indicates that growth for Q2 likely surpassed the Bank of Canada's (BoC) 1.5% estimate, the weak handoff from the June reading suggests the economy is still likely to underperform the central bank's heady projection for Q3, stated Desjardins.

The latest GDP report provided slightly better news than economists were expecting, but it won't be enough to assuage the BoC's concerns about downside risks to the economy, pointed out the bank. When measured in per capita terms, the Q2 advance in GDP still looked quite weak.

As a result, Desjardins doesn't think this data will derail a third consecutive rate cut in September.

Government of Canada (GoC) bond yields are slightly higher following the release and are now flat on the day, but that comes after a precipitous decline over the past week, according to the bank.