Q2 GDP grew +2.9% q/q annualized as expected – a significant improvement over Q1 at +1.4% and +1.7% in both Q4 and Q3 2017. Personal consumption expenditures rose +2.6% in Q2 vs. only +1.1% in Q1. Business investment grew +1.9% but that was after five straight quarters of strong growth which put it at +6.7% y/y, making it the biggest contributor to GDP over the past year. Residential investment rebounded to +1.1% after -10.5% in Q1, which was preceded by +13.5% in Q4 2017, demonstrating the housing market’s violent swings over the past year. Exports grew a very strong +12.3% due to the robust U.S. economy. However, they were muted by imports which subtracted -2.1pp from the headline, largely because of four refinery shutdowns which caused a +45% increase in petroleum imports. Trade remains a worry, and the Bank of Canada is likely to raise rates once more this year, but we maintain our GDP growth forecast of +2.1% in 2018, cooling to +1.9% in 2019.
