09:09 AM EDT, 08/29/2025 (MT Newswires) -- A weaker-than-expected trend in monthly GDP figures is supportive for CIBC's forecast of a September interest rate cut, although the bank notes that upcoming employment and CPI data will still be important for that call, Andrew Grantham said Friday.

Grantham's comments come after the CIBC man noted a slump in exports, driven by the imposition of U.S. tariffs and a reversal of Q1's front-loading activity, drove a contraction in Canadian GDP during the second quarter.

Grantham said the 1.6% annualized contraction was worse than the consensus projection (-0.7%), but broadly in line with the Bank of Canada's July MPR forecast. He noted exports slumped by 27%, eclipsing the more moderate 5% decline in imports. Domestic demand, however, was "actually fairly solid", rising by 3.5% following a downwardly revised 0.9% drop in Q1. However, Grantham also noted, the average of the first half of the year (just over 1%) is still consistent with demand growing slightly below its long-run potential. "For the second quarter, increases in residential investment, consumer spending and government outweighed the understandable (given trade uncertainties) drop in business investment," Grantham added.

Grantham also noted monthly data for June was weaker than expected, showing a 0.1% reduction in GDP (consensus +0.1%) driven largely by a drop in the manufacturing sector. He said while that June drop is projected to have been reversed in July (+0.1% advance figure), that still leaves momentum heading into Q3 weaker than CIBC or the BoC were likely expecting. Grantham noted early tracking for Q3 is between 0-0.5% depending on growth rates assumed for the remainder of the quarter, in contrast to the BoC's July MPR projection of +1%. "That weaker than expected trend in the monthly figures makes today's release supportive for our forecast of a September interest rate cut, although upcoming employment and CPI data will still be important for that call," he added.