Soft landings all around?

On Thursday the US Bureau of Economic Analysis published preliminary data showing that the US economy continued to expand at a relatively subdued pace in Q2.  Today Statistics Canada reported that real GDP grew in May but probably shrank slightly in June. Are the two countries' central banks close to achieving the "soft landing" they have been aiming for? 

The US data are relatively clear-cut, though it should be noted that this is a preliminary estimate, with more complete information to come on August 30. Real GDP rose at a 2.4 percent annual rate in Q2, up from 2.0 percent in Q1.  The slight acceleration in growth in part reflected rising business investment, which will not be unwelcome to the Fed. Higher inventory accumulation may be a consequence of the reported slower growth in consumer spending, though there is little real evidence that the US consumer is running out of steam.

The Canadian numbers are a bit more difficult to parse, and likely to remain that way for another month or two at least. The 0.3 percent month-on-month rise in GDP  in May was slightly lower than StatsCan's initial estimate of 0.4 percent, but there were special factors at play. While the service sector showed robust 0.5 percent growth, the overall economy was held back by a sharp fall of 2.1 percent in the energy sector, reflecting the very early and severe start to the forest fire season in the main energy producing Provinces. 

The initial estimate of a 0.2 percent decline in June seemingly occurred despite a somewhat surprising rebound in oil and gas production, as wholesale trade and manufacturing output apparently declined in the month. Even with the pullback in June, it appears that the Canadian economy yet again stayed well away from the recession that the media have been craving for more than a year now: firm data on this will not be available until September 1.

Canadian monthly GDP data will remain hard to interpret through Q3. The strike at ports in British Columbia obviously hit national GDP in the first half of July. It is always hard to know how long the economy takes to rebound from such shocks, but experience says it usually happens much faster than expected. If it turns out that real GDP fell in July, it is a near-certainty that growth for August will rebound sharply, but of course that will not be knowable for several months.  

So, are the Fed and the Bank of Canada likely to assume they have achieved the fabled soft landing?  In both countries, inflation has been falling sharply for better than a year, even though the economies are continuing to expand. Labour markets are tight by historical standards, yet wages remain well-behaved. This is not how the textbooks - well, at least the chapter on the Phillips curve -- say things are supposed to happen.  One could hope that the central banks will not be too vocal about taking credit for the way things seem to be turning out -- and one could also hope that they are revisiting some of the models to try to figure out how and why things have actually worked out so well.