08:52 AM EST, 11/29/2024 (MT Newswires) -- Growth in the Canadian economy slowed in Q3 and a weaker-than-expected end to the quarter suggests growth may not pick up as much as the Bank of Canada expects in Q4, said CIBC.

Headline gross domestic product Friday rose at a 1.0% annualized rate in Q3, which is in line with the earlier tracking and consensus forecast, but 0.5% below the BoC's Monetary Policy Report projection, noted the bank.

However, the detail was more positive than the headline, with consumer spending accelerating to a 3.5% annualized rate, and residential investment growing -- although modestly -- for the first time in a year, stated CIBC.

Final domestic demand was a solid 2.4%, with headline GDP dragged lower than that by inventories and net trade.

Monthly data suggested that the economy ended the quarter on a weaker note than anticipated, with the 0.1% month-over-month increase in September two ticks below the consensus forecast and the advance estimate of 0.3%, pointed out CIBC.

The early estimate for October is for further slight growth of 0.1% month over month.

As a result, early tracking for the final quarter of the year is around 1.0% -- assuming 0.1% increases in November and December -- which will again fall short of the BoC's MPR projection of 2.0%, added the bank.

Friday's data also contained upward revisions to growth during the early post-pandemic periods, which left the level of GDP 1.4% higher as of Q2 2024. However, this shouldn't impact the BoC's output gap projections, as CIBC already knows what inflation was doing during the period of revision.

Instead, this data suggests that productivity may not have been quite as bad as initially believed in recent years. If anything the most recent trend -- in terms of the Q3 figure and early Q4 tracking -- suggests that the output gap may be widening further which will concern policymakers, according to the bank.

Despite the positive historic revisions and better underlying detail within the Q3 data, Friday's GDP figures point to a weaker recent trend in activity than Canada's central bank was expecting and is supportive of a 50bps cut at the December meeting, although next week's employment figures are still likely more important in making a final determination, said CIBC.