The economy grew by 0.5% in the second quarter, greater than 0.4% first-quarter growth. We expect below-trend growth in a range of 1.25%–1.5% for the full year amid monetary policy restrictiveness that has been more potent than in the U.S.

Headline inflation slowed in August to its smallest gain in three and a half years. The Consumer Price Index rose by 2.0% year over year, down from 2.5% in July and representing the slowest pace since February 2021. The pace of core inflation, which excludes volatile food and energy prices, also slowed, to 2.4% year over year compared with 2.7% year over year in July. We foresee core inflation ending 2024 in a range of 2.1%–2.4% on a year-over-year basis.

On September 4, for a third consecutive meeting, the Bank of Canada (BOC) cut its overnight rate target by 25 basis points, to 4.25%. The bank noted that the labor market continued to slow and that inflationary pressures had broadly eased, though inflation remained elevated in some areas of the services sector. We foresee the equivalent of one to two additional quarter-point rate cuts this year, which would leave the overnight rate target in a range of 3.75%–4% at year-end.

Canada’s economy added jobs in August for the first time in three months, but the unemployment rate rose as the labor force continued to expand. Part-time work fueled the job growth, with 65,700 positions added. However, full-time employment fell by 43,600, for a net gain of 22,100 jobs. The unemployment rate rose to 6.6% from 6.4% as the labor force grew by 82,500 workers. We anticipate the unemployment rate ending the year around current levels, though risks skew higher as still-restrictive monetary policy could eat into demand and, ultimately, corporate profitability.