The consensus view is for a 0.6% increase in gross domestic product in the April-June period, with June's GDP up 0.1% from the previous month. In Q1, Canada's GDP contracted 0.3%. Statistics Canada will release the results Friday morning.

"We have scaled back our view in the last few days," said John Clinkard, chief Canadian economist for Deutsche Bank Securities. He said Deutsche Bank had been expecting quarterly GDP growth of a little more than 1%, but made a downward adjustment after hearing comments last week from a senior Bank of Canada official warning that the economy may be rebounding at a slower pace than had been expected. "We thought maybe they knew something that we didn't."

Clinkard said Canada posted "healthy" manufacturing shipment numbers in June and wholesale sales remained strong. Retail was a little disappointing, he said.

One of the key components of Friday's Statistics Canada report will be the inventory numbers, Clinkard said. "We'll keep an eye on inventories and see what they do. There might be a little more strength there than we thought."

BMO economist Michael Gregory said the consensus numbers have come down over the past few days to match BMO's outlook of +0.6% for the quarter and +0.1% for the month of June.

"The story here is that growth is weak, largely because of the drag from the export side," said Gregory, noting that slowing U.S. sales continue to affect Canada. The strength of the Canadian dollar also favoured imports over exports, he said.

The positive reading on economic growth will help Canada avoid the technical definition of a recession, described as two consecutive quarters of negative growth, Gregory said.

The growth trajectory is coming out a little lower than the Bank of Canada anticipated in its July monetary policy report update, he said, but added that the GDP results won't be enough to cause the central bank to shift its emphasis in next week's interest rate announcement.

"If things worsen from here, they could have an excuse to cut rates later in the year," he said. "But for now they would like to keep the door open without signalling their intentions."

RBC is projecting quarterly above-consensus GDP growth of 0.8% for the second quarter and 0.2% for June. Assistant chief economist Paul Ferley said Canada saw strength in manufacturing and wholesale trade in June and the monthly numbers should help boost the results for the quarter.

There won't be anything in the Friday report to alter the Bank of Canada's interest rate position, said Ferley, who agreed that the rate will hold steady next week. "We would have to get a real outlier of a report to get a response from the central bank."

In a research note, CIBC economist Avery Shenfeld said he expects to see GDP increase 0.7% for the quarter and 0.1% for the month of June. He said the troubles in the Canadian economy are mostly abroad and that has resulted in lower export volumes.

"Canada's economy is keeping its nose above the recessionary water line, if only barely in real GDP terms," Shenfeld said. "Nominal GDP will be much stronger. We may have sold reduced volumes of energy products, but we got a lot more for them. The result is that nominal GDP could top 7% annualized."

By Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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