Canada will release gross domestic product data for December and Q4 on Friday, noted Scotiabank.

The figures are expected to be reasonably constructive and could add to the tone of strong job market readings and persistent core inflation. Bank of Canada watchers will then shift their attention to one more jobs report before the March 12 decision, and whether or not United States President Donal Trump is bluffing about threatened tariffs that he delayed until early March.

At present, markets only have about a one-in-three chance at a cut priced for the next meeting, said the bank.

Scotiabank estimated a 0.3% month-over-month seasonally adjusted rise for December GDP and 1.7% quarter-over-quarter seasonally adjusted annual rate (SAAR) for Q4 GDP. Statistics Canada had guided that December GDP was tracking at 0.2% month over month back on Jan. 31.

Data since then suggests upside risk, pointed out Scotiabank. January GDP is a tough call but may eke out a small gain not least of which because hours worked soared for the second straight month.

The upside surprise to Canada's retail sales numbers gave the bank a little more confidence in its GDP estimates. Normally retail's small weight in GDP doesn't affect much, but the 2.5% month-over-month volume increase was a lot higher than what Scotiabank had figured based on their advance nominal retail guidance and relevant CPI categories.

Retail sales volumes are tracking a third straight quarterly expansion starting in Q3 into Q4 and with enough momentum built into the math to provide a strong running head start into Q1.

As a consequence, total consumer spending that was up by 3% quarter-over-quarter SAAR or better in each of Q1 and Q3 last year might have performed well again in Q4. Whether retail volumes under- or over-state consumption growth is unclear but the bank has limited ability to track services spending volumes. Retail sales are not a value-added concept like GDP, so there is translation risk.

The surge in retail might have been at the expense of spending on services. But then again, since Canadian retail numbers include no spending on any services, this means that a likely surge in spending at restaurants that benefited from the GST/HST cut could add upside risk to the retail depiction of overall consumer spending.

Scotiabanks advised to watch Tuesday's December reading on spending at restaurants and bars from Statistics Canada in the context of recent strength with the caution that the numbers are nominal.

If tracking for December and January Canadian GDP is reasonably close with no material prior revisions, then Q1 GDP is "very" tentatively tracking 1.5% q/q SAAR, added the bank.

That's not great growth, but it's hardly bad and Scotiabank is still waiting for the recession that some thought was for sure going to happen. Details behind the Q4 GDP headline number will be important.

There could be a net trade contribution. Inventories are uncertain but have been running relatively hot on a combination of trend growth and post-pandemic tolerance toward holding relatively high inventories relative to sales.

Some will claim that a recession already kind of did happen by citing per capita GDP numbers, but Scotiabank has never accepted that reasoning. Per capita GDP may stabilize if not begin to turn higher going forward.

One reason why it was depressed was excessive immigration, especially of temps, but this is going to reverse going forward. Population growth is already reversing. No doubt shocks lie ahead, such as potential tariffs, but if they can be avoided, then per capita GDP may bounce back but still be restrained by competitiveness challenges and weak productivity.

In any event, since temps have been the biggest driver of population growth, it's important to constantly emphasize they -- international students, temporary foreign workers and asylum seekers -- -shouldn't be expected to contribute proportionately to GDP as other population segments do, according to Scotiabank.