08:35 AM EDT, 07/02/2024 (MT Newswires) -- The good news is that the Canadian economy didn't disappoint for a change on Friday, with real gross domestic product (GDP)

expanding 0.3% m/m in April, which met market expectations, said Rosenberg Research.

While the "flash" growth estimate for May is back down to earth at 0.1% m/m, Q2 as a whole looks set to come in around a +1.7% annual rate which tops the current Bank of Canada (BoC) forecast of 1.5% growth, noted Rosenberg Research.

This has the Bay Street crowd thinking the BoC will take a pass at the July meeting, it stated.

Rosenberg isn't convinced. Policy is still too tight for a sub-2% growth economy -- assuming that it's sustained -- with a backdrop that the BoC acknowledges is in a state of "excess capacity." The broad 12-month trend is still rather moribund at just a 1.1% increase, so the economy is still just bouncing along the bottom.

The impact of the damage the BoC has already done has shown through in the areas most sensitive to credit conditions and interest rates: construction (-0.4% m/m and -2.4% y/y), real estate (-0.1% m/m and just +1.5% y/y), automotive (-1.7% m/m and +0.4% y/y), and building materials (-1.0% m/m and -2.2% y/y).

All in, Canada has an economy that is trending at just over 1.0% growth and underlying inflation, despite the May hiccup, is very close to target. As a consequence, Rosenberg remains dovish (as in bullish) on rates.

The only thing the Canadian dollar (CAD or loonie) has going for it is this recent run-up in oil prices on the back of heightened concerns in the Middle East, the fact that market positioning has been exceedingly one-sided in terms of super-elevated net speculative shorts, and the dismal polling

results for the Liberal Party (though the election is still 15 months away), added Rosenberg.