Canadian real GDP advanced 1.1% in the second quarter. The increase was in line with expectations , which may allow the Bank of Canada to hike rates once again next week.

Second quarter GDP was running at a 4.3% annual rate, although this is down from an upwardly revised 6.2% gain in the first quarter. “The cloud behind the silver lining is that most of the advance was registered back in April, with two subsequent months each showing only a tepid 0.1% gain in monthly real GDP,” says CIBC World Markets. “And exports, the key to Canada’s ability to keep its cyclical manufacturing sector in gear, managed only a 1.8% real advance in the second quarter, well off their first quarter pace.”

CIBC notes that inventories and imports both surged in the quarter, “as the Canadian economy underwent a restocking that pulled in imported goods, particularly vehicles.”

“GDP was strong in Canada in Q2, in contrast to the stuttering U.S. performance,” concludes BMO Nesbitt Burns. “The sturdy domestic data hand the BoC a ready excuse to hike interest rates again.”

CIBC says, “The sluggish pace to GDP growth as Q2 came to an end points to a significant deceleration in the second half. Exports will get a lift in the third quarter as US vehicle sales picked up, but the prognosis for Q4 manufacturing and exporting is much less hopeful, given signs of a flagging in U.S. consumer sentiment.”

Nevertheless, CIBC concedes, “The overall quarterly pace is enough to keep the Bank of Canada on track for a quarter-point rate hike next week.”