09:25 AM EDT, 10/31/2024 (MT Newswires) -- Statistics Canada Thursday said that the real gross domestic product likely advanced a "heady" 0.3% in September, noted Desjardins.

That strength was due to gains in finance and insurance, construction, and retail trade. The latter had been a category of concern earlier in the year, with population growth not translating into higher retail receipts, said the bank.

However, activity in that very interest-rate-sensitive sector has been on the rise in recent months. In July and August, retail trade was up 0.9% and 0.6%, respectively.

That said, the Canadian economy as a whole struggled to make progress this summer, pointed out Desjardins. The statistical agency revised its estimate of July GDP growth one tick lower to 0.1% and said that the economy didn't advance at all in August.

Part of the slowdown in August, however, appears to have been temporary in nature, added the bank. Rail lockouts disrupted activity in that industry while retooling and maintenance work at multiple auto plants continued to plague manufacturing activity during the month.

As a result, some of the gains seen in September might just represent a rebound from the earlier weakness. That soft patch leaves Q3 GDP tracking 1.0%, which is below the Bank of Canada's 1.5% forecast.

However, the three-month annualized rate of GDP growth was hovering around 2% after September. Any pickup in underlying momentum during those three months came before the latest 50 basis point rate cut, recalled Desjardins.

Markets are interpreting the Q3 undershoot in GDP as a sign that the BoC needs to deliver another jumbo-sized rate reduction, according to the bank. But with activity appearing to reaccelerate, forward-looking central bankers might not be in such a hurry to unleash another 50 basis point reduction.

The very preliminary estimate of Desjardins for Q4 GDP suggests that there is an upside risk to the central bank's 2.0% projection. So, at least for now, Desjardins will stick with its call that Canada's central bank returns to a more standard 25 basis point move in December.