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Prime Minister Mark Carney announced on Monday that the Department of National Defence would receive an additional $9.2bn (0.4% of GDP) this fiscal year, raising total defence spending to NATO’s 2% of GDP target. This is five years ahead of the timeframe …
13th June 2025
Add manufacturing to list of weak areas in the economy Manufacturing sales volumes plunged in April as the temporary boost to exports from tariff front-running unwound. Prospects for a meaningful rebound over the coming months look slim, with new orders …
The overnight strikes by Israel on Iran mark a major escalation in the conflict in the region and, with the oil market tighter than it was a few months ago, the risks to oil prices look more balanced than we’d previously thought (rather than skewed to the …
Canada Chart Pack (June 2025) …
11th June 2025
Government officials confirmed this week that talks are ongoing between Canada and the US over a new trade and security deal after the two countries’ leaders met in Washington last month. While little has been given in the way of a timeline, there is …
6th June 2025
Labour market continuing to struggle The rise in employment in May was better than expected but, paired with recent data, still shows that the labour market is struggling. We are therefore sticking to our view that the Bank of Canada will cut interest …
Visa approvals for temporary residents have picked up, which suggests that, rather than contracting as the government previously outlined, the population will continue to grow this year. This will keep upward pressure on labour force growth and we now …
5th June 2025
Reversal of tariff front-running sends deficit to record high The jump in the trade deficit to a record high in April was larger than expected as tariff front-running reversed with “Liberation Day” and Canadian exporters paused to make more of their …
The Bank of Canada avoided surprising markets by keeping its policy rate at 2.75% today, as it continues to wait to see the full impact of US trade policy on the economy. Nonetheless, the Bank confirmed that its bias remains toward loosening policy …
4th June 2025
Rate cuts delayed, but still coming The Bank of Canada avoided surprising markets by keeping interest rates unchanged at 2.75% today, as it continues to wait to see what the full impact of uncertain US trade policy on the economy will be. The accompanying …
A very brief reprieve The ruling by the US Court of International Trade this week (see here ), albeit quickly put on hold, raises the possibility that the US’ 25% fentanyl-related tariffs on non-USMCA compliant imports from Canada will soon be a thing of …
30th May 2025
Fall in domestic demand could still persuade the Bank to cut Despite the upside surprise to first-quarter GDP growth, the contraction in domestic demand means we are sticking to our view that the Bank of Canada will cut interest rates again next week. The …
This report is part of our Future of Europe series. Read more analysis, explore the supporting data, and learn about our broader European coverage on the dedicated Future of Europe page. Europe is being buffeted by geopolitical and geoeconomic shifts but, …
In this Update, we answer several key questions about how the US Court of International Trade (CIT) tariff ruling might affect the US and other economies. The outlook may now rest on the decision of the Republican-stacked Supreme Court. The upside risks …
29th May 2025
Summary of Deliberations from April meeting struck a dovish note despite Bank’s pause Labour market is weakening while upside risks to inflation have eased Bank set to cut policy rate to 2.5% despite market pricing to the contrary We suspect the Bank …
28th May 2025
How concerning is underlying inflation? The removal of the carbon tax pushed headline inflation down to 1.7% in April, comfortably in the bottom half of the Bank of Canada’s 1% to 3% target range. Nonetheless, the acceleration of the Bank’s preferred …
23rd May 2025
Tariff front-running supports retail sales The jump in motor vehicle sales in March suggests that tariff front-running has supported consumption, although the big picture is that retail sales were strong in most of the key sectors. Likewise, the …
The near-term outlook for Canada is a little bleak. After a solid first quarter, we expect GDP growth to be muted as the imposition of US tariffs and risk of more to come weighs on exports, consumer spending and investment. Employment is likely to decline …
21st May 2025
Sharp drop in headline rate masks hot underlying inflation The removal of the carbon tax sent energy prices tumbling in April, pushing headline inflation below the 2% target. More concerningly, the Bank’s preferred CPI-trim and CPI-median core measures …
20th May 2025
The softening housing market has mostly flown under the radar, but that is soon likely to change following April’s data, which showed house prices taking another sharp leg down. Combined with the steep decline in manufacturing sales volumes reported for …
16th May 2025
Sharp drop in manufacturing sales volumes The sharp decline in manufacturing sales volumes in March suggests the earlier boost from US tariff front-running is now reversing. A modest rise in new orders supports our view that the watered-down tariffs that …
15th May 2025
The recent climbdown has left the effective US tariff rate on the rest of the world at around 15% as opposed to the 27% which was threatened at the height of this year’s trade war. While this is still the highest since the 1930s, it is unlikely to cause a …
13th May 2025
Global Trade Stress Monitor …
The US and China have each suspended for 90 days all but 10% of their Liberation Day tariffs and cancelled other retaliatory tariffs. This is a substantial de-escalation. However, the US still has much higher tariffs on China than on other countries and …
12th May 2025
Diversifying away from the US? This week’s data releases showed a sharp fall in trade flows between Canada and the US in March, following the imposition of some tariffs by the US and retaliatory tariffs by Canada. Canada’s exports to the US fell by 6.6% …
9th May 2025
Tariffs weigh hard on manufacturing employment Employment would have fallen again in April were it not for the boost from the federal election, which supports our view that the Bank of Canada will resume its loosening cycle next month and ultimately cut …
Tariffs bite, but strong demand elsewhere softens the blow The surprise improvement in Canada’s goods trade balance in March, despite the imposition of US tariffs, was thanks to a surge in exports to other countries. Nonetheless, as the survey indicators …
6th May 2025
Magic Carney The Liberals won 169 seats in the election this week, just missing out on the 172 required for a majority. Nonetheless, that was still a momentous result for the Liberals considering they were, at one point earlier this year, projected to …
2nd May 2025
Bad but not awful Although the 0.2% m/m contraction in GDP in February was worse than expected, the preliminary estimate of a partial rebound in March should soothe fears that the economy is rapidly falling into recession. We expect GDP growth to slow …
30th April 2025
While higher lumber tariffs will not significantly impact GDP growth in the US or Canada, they will drive up costs for US homebuilders. As affordability is already stretched, it is unlikely that homebuilders will be able to pass these costs onto buyers in …
29th April 2025
Although the Liberals have just missed out on a majority, Prime Minister Mark Carney should still be able to implement his fiscal plans with support from the NDP or Bloc Québécois. If anything, the need to grant concessions to those parties means fiscal …
Both major political parties unveiled their election platforms over the past week, featuring their fiscal projections for the next four years. As expected, the Liberals have made little attempt to balance the budget. Incumbent Prime Minister Mark Carney …
25th April 2025
Slump in sentiment not yet weighing heavily on spending The moderate decline in retail sales volumes in February was probably due to the unseasonably severe winter weather rather than the recent slump in sentiment, with the latest flash estimate implying …
Markets were almost evenly split on what the Bank of Canada would do yesterday, right up until the last minute. In the end, the Bank opted to keep interest rates unchanged at 2.75%, rather than loosen policy by an additional 25bp. In his opening …
17th April 2025
The Bank of Canada’s decision to keep interest rates at 2.75% today was not a big surprise given recent above-target core CPI gains, concerns about tariff-induced price rises and uncertainty about the extent to which the economy requires additional policy …
16th April 2025
Bank holds but further cuts likely amid dovish communications The Bank of Canada’s decision to keep interest rates unchanged at 2.75% today was not a huge surprise given recent above-target gains in core prices, concerns about future price increases and …
Concerning signs for Canada’s housing market The housing market took another leg down in March, with the larger decline in single-family home prices suggesting that owner-occupiers rather than investors are behind the most recent weakness. Nonetheless, …
15th April 2025
Gasoline-driven fall in headline inflation The downward surprise to CPI inflation in March, along with the first target-consistent gains in CPI-trim and CPI-median in eight months, at the margin raise the odds of a rate cut by the Bank of Canada tomorrow. …
Canadians shun the US, but will they spend at home? It’s been two months since Canadians began boycotting US goods and services in the wake of the aggression from President Trump over tariffs and his apparent desire to make Canada the 51 st state. The …
11th April 2025
Downside risks to the economy that prompted March cut have eased Meanwhile, underlying inflation pressures are far too strong for comfort Bank likely to pause next week, but we still expect further cuts this year Despite the economy facing the existential …
10th April 2025
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
We have updated our forecasts for Canada to account for the latest changes in US trade policy. (See Table below.) A recession should be avoided, but the harsh tariffs on the vehicle sector and uncertainty about the future of the USMCA mean GDP growth is …
While Canada escaped “liberation day” relatively unscathed, the imposition of US tariffs and risk of more to come will still weigh on exports, consumer confidence and investment. With immigration also plunging, we now expect GDP to expand by just 0.4% …
9th April 2025
The Bank of Canada’s quarterly business and consumer surveys were nowhere near as bad as we feared, but that may only be because the survey periods preceded the most recent tariff announcements. Either way, it’s clear that those tariffs and uncertainty …
7th April 2025
Despite being one of the first targets in President Donald Trump’s crosshairs following his return to the Oval Office, Canada made it through “Liberation Day” relatively unscathed. We gave our full thoughts in a note published on Thursday. (See here .) …
4th April 2025
Tariffs not entirely to blame for employment fall While US tariffs will be the obvious culprit for the fall in employment in March, two-thirds of the decline was concentrated in the services sector, suggesting that other factors were at play. Nonetheless, …
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
Canada has escaped much more lightly than we feared from President Trump’s big announcement, with the import-weighted US tariff likely to be 8% based on current plans and potentially below 5% in the near future. Nonetheless, the much larger tariff rate on …
Tariffs knock trade balance back into deficit The large fall in exports in February was to be expected given the (albeit temporary) imposition of tariffs on goods imports into the US that month. While Canada may have gotten off relatively lightly on …
Hopes of making it a week without any new tariff news were dashed on Wednesday when President Donald Trump announced a 25% tariff on motor vehicle and parts imports from April 3 rd . Despite accounting for 10% of Canada’s goods exports to the US, the hit …
28th March 2025
