Canada's Economic Growth Expected to Slow in Q3

Canada's economic growth in Q3 is expected to be slower than its previous quarter's surge, according to RBC. Next week's retail sales data is anticipated to show a decline of around 0.8% from June, ending a six-month streak of gains.

The underlying weakness may have been sharper when adjusted for gasoline price increases, with early industry data showing a significant pullback in July vehicle sales. However, strength earlier in the year means volume sales likely remained relatively firm on a year-over-year basis after rising 2% as of June. RBC's tracking of card transactions suggests that auto sales rebounded partially in August.

Wholesale and manufacturing sales reports have also signaled a softer start to Q3, declining by 0.6% and 1.4% in July, respectively, after significant increases in the previous quarter. But labour market data has held on to earlier improvements with the unemployment rate remaining at 6.4% in Q3.

Bank of Canada Governor Tiff Macklem is scheduled to speak about economic developments next week, which may provide additional guidance ahead of its interest rate decision on October 28. Policymakers are closely watching for signs that the economy's broad-based growth rebound in Q2 extended to Q3.