BMO on The Day Ahead in Canada

07:41 AM EDT, 08/29/2025 (MT Newswires) -- Canada will release gross domestic product for June and Q2 at 8:30 a.m. ET on Friday, said Bank of Montreal (BMO).

The bank is expecting the economy to have contracted 1% annualized in Q2 as United States tariff uncertainty weighed on net exports and business investment. Consumer spending held up, while the housing market continued its uneven pattern.

The flash estimate for Q2 called for real GDP to be essentially flat, but that masks some differences in output by industry versus spending -- there can be significant gaps between the two measures in times of big swings in net exports, recalled BMO.

The Bank of Canada's July projections included a hefty baseline contraction of 1.5% a.r. in the quarter, so it will be tough for the data to surprise to the downside, stated BMO. Given that pessimistic outlook, the Bank -- like the Federal Reserve -- will be more focused on the employment and inflation reports ahead of next month's meeting.

At the same time, the bank is expecting a 0.2% month-over-month expansion in real GDP for June. That's a tenth above Statistics Canada's flash estimate as wholesale and retail volumes were solid, while manufacturing was flat.

Hours worked were higher and home sales rose for the third straight month. BMO will also be watching the July flash for an early read on whether the uptick in June held up to start Q3, especially since hours worked stepped back and the preliminary activity indicators were mixed.

The bank is also expecting Canada's federal budgetary balance for June later Friday.

The US dollar (USD) index is up 0.2% while the Canadian dollar (CAD or loonie) at $1.375 is slightly weaker, according to BMO.

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