Statistics Canada reported that the number of new motor vehicles sold in June was down 2%, following a gain of 2.2% in May. A total of 142,715 new vehicles were sold in June.

RBC Financial Group says that after a series a gains late last year and earlier this year, new vehicle sales remain at comfortably high levels.

“Early industry readings in July suggest that next month’s sales could also be on the soft side despite the reintroduction of incentives in June,” says RBC. “This weakness is likely to prove temporary. Financing remains attractive but, more importantly, job and income gains are up sharply so far this year. In addition, our research indicates that there is a substantial degree of pent-up demand that has yet to be tapped in Canada.”

RBC predicts that these factors are likely to keep Canada’s domestic economy moving well ahead of that of the U.S. economy this year and next, and will necessitate more rate hikes as the Bank of Canada guides monetary policy towards a more neutral setting.

“For now, we continue to anticipate that the Bank of Canada will hike rates at each of its next three policy meetings this year by increments of 25 basis points. The risks to our rates forecast, however, have tilted to the downside because of the problems faced by the U.S. economy. The move by the U.S. Fed yesterday to keep its policy rate unchanged at 1.75% but change its neutral bias to an easing bias has increased the risks that the Bank of Canada may forgo a 25 basis-point rate hike at one of its coming policy meeting,” it says.