Canada’s economy

grew 0.1 per cent during the second quarter, according to a

flash estimate released Thursday

by Statistics Canada, but economists say the full picture won’t be known until expenditure-based numbers for the quarter are released at the end of August.

That data tends to differ from the

gross domestic product (GDP)

data just released — which said the economy shrank 0.1 per cent in May, but grew by an estimated 0.1 per cent in June —

and provides a fuller picture of what is happening in the economy.

It’s too early to say whether Statistics Canada’s prediction for second-quarter growth will end up beating the

Bank of Canada

‘s expectations of a 1.5 per cent contraction, but here’s what economists think the latest GDP data means for the Bank of Canada and

interest rates.

‘Treading water’: Scotiabank

“Canada’s economy is treading water,” Derek Holt, vice-president and head of capital markets economics at the

Bank of Nova Scotia,

said in a note.

He said the data is “distorted” by companies still seeking to get ahead of tariffs, which helps explain the slight uptick in growth by the manufacturing and transportation and warehousing sectors in May, with the remaining sectors making “very little contribution.”

He also wondered if the data reflects delayed actions by industry on expectations of fiscal stimulus from the federal government when it tables a budget in the fall.

Holt said the expenditure-based GDP data will paint a better picture, but there are still too many unknowns now, including the trade figure for June, any revisions to previous releases and inventory figures for the quarter.

As a result, May’s data “are largely meaningless in my opinion,” he said.

Scotiabank currently doesn’t have any interest rate cuts pencilled in for the rest of the year.

‘Modest contraction’: CIBC

“We suspect that next month’s expenditure data will be slightly weaker and show a modest contraction,” Andrew Grantham, an economist at CIBC Capital Markets, said in a note.

CIBC is currently forecasting expenditure-based GDP to shrink 0.5 per cent, compared to the 1.5 per cent decline that the Bank of Canada is expecting. Nonetheless, CIBC said its forecast still allows for “greater slack within the economy,” which would create the conditions for core inflation to cool as supply outstrips demand.

Currently, the Bank of Canada’s preferred measures of core inflation are hovering around 3.1 per cent, just above policymakers’ target range of one per cent to three per cent.

That will “allow policymakers to deliver two more interest rate cuts before the end of the year,” Grantham said.

‘General malaise’: Desjardins

“Canada’s economy appears to have, at best, stalled out in the second quarter,” Royce Mendes, managing director and head of macro strategy at Desjardins Securities, said in a note.

Despite signs of a rebound in the real estate sector, which grew in May for a second consecutive month, “a general malaise seemed to take hold across a number of industries as tariffs began to bite,” he said, with only seven of the 20 sectors growing in May.

Mendes said the growth picture will only clarify with the release of the expenditure-based GDP data, but added that policymakers have a “strong track record of forecasting the most recent period’s growth rate.”

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He said a number of factors, including tariff uncertainty, mortgage renewals and slowing population growth, will weigh on the economy and force the Bank of Canada to restart rate cuts “as early as September.”

• Email: gmvsuhanic@postmedia.com