In this week’s The Seven…

• New day, new problems - Risks have shifted, but it’s not necessarily worse
• Good for now - Consumer resilience will be tested
• Chipping in - Parents co-signing mortgages
• Holding on - Bank of Canada rate announcement on Wednesday
• Interesting Fact - Older Canadians report higher life satisfaction
• Chart of the Week - Better than last year - Global trade uncertainty

“No, I'll stand my ground/Won't be turned around/And I'll keep this world from draggin' me down/Gonna stand my ground /And I won't back down”

--“I Won’t Back Down,” Tom Petty

“I’m surprised.” That’s the reaction I get when I speak to people these days about the economy.

With ongoing trade tensions and the conflict in Iran, many folks are surprised that equity markets have rebounded and the economic data has stayed mostly resilient (see the discussion of retail sales below). In other words, how can the economy be standing its ground in the current landscape?

It’s a fair point, but perhaps it’s less surprising when you consider the following: global oil use as a share of the economy has declined, Canada is a massive net oil exporter, the tariff hit has been less impactful than initially feared, we are in the midst of an AI boom, and interest rates have fallen from their 2023-2024 peaks.

If I had to pick the top example of something that is still concerning, but less so than last year, it is tariffs. This month marks the 12-month anniversary of the so-called “Liberation Day” tariffs. Those tariffs were successfully challenged in court, and they were replaced with a smaller 10% baseline tariff. Global trade uncertainty is elevated, but it has plummeted from the April 2025 peak (see the Chart of the Week below).

In other words, we still have problems, but they have shifted. The CUSMA review this summer is on everyone’s radar. The latest is that the U.S. wants concessions (like bringing back U.S. liquor onto Canadian shelves) before commencing talks, while PM Carney has mentioned that we have our own irritants (namely U.S. sector tariffs). Our base case is a continuation of the status quo on tariffs.

The war in Iran remains front and centre, and the longer it continues, the more concerned we are about risks to global growth. We’re of the view that this means higher-for-longer oil prices, but that prices will recede in the second half of the year. That’s consistent with oil futures, though we should all humbly admit no one really knows how this ends.

How it all shakes out in our forecast is that we’ve downgraded our growth expectations for Canada while upgrading Alberta. Our base case has the economy slowing, but avoiding a technical recession. Others, like the International Monetary Fund, share this view. We can’t be complacent, though. Former Bank of Canada Governor Stephen Poloz recently put the odds of a recession at 30%—a reasonable guess.

The opportunity, and forecast upside, lies within our borders. As we discussed yesterday, we can address global energy insecurity and long-standing growth challenges here at home—a one-two punch. But it extends beyond energy, with opportunities across sectors like critical minerals, agri-food, tech, and aerospace.

Good for now - The resilience of Canadian consumers will be tested

Hot off the press this morning, retail numbers point to a resilient Canadian consumer. Preliminary estimates show a 0.6% increase in sales for March, following a 0.7% rise in February. We’re now set up for a decent bump in consumer spending in Q1, adding to GDP.

Let’s not get too carried away. First, much of the new spending is nominal. We don’t have a spending breakdown for March, but we suspect it was gasoline-driven (gasoline prices spiked 21% last month). Second, the broader economic backdrop has been challenging. Canadian employment actually declined in the first quarter, the population has also shifted into reverse, and now new inflation pressures have emerged.

In short, we don’t think this spending growth will last—expect to see a flattening in the second quarter.

Turning to Alberta, sales have been wobbly to start the year, falling in February after a January spike. Sifting through the monthly noise, a positive trend has emerged starting late 2025 (see the chart below). So far this year, sales are tracking 5.2% above prior year levels in the first two months, nearly doubling the national pace. This makes sense for a couple of reasons: 1) As the nation’s largest oil producer, Alberta’s economy is more insulated from rising fuel costs compared to other regions, and the labour market has outperformed. 2) Alberta’s population is still growing, bucking the national declining trend. Retail numbers don’t capture restaurant and bar sales, and we’ve shown strong gains in that department, in part fueled by strong visitor numbers to the province.

But even in higher-flying Alberta, we expect to see sales growth slow. Higher energy prices still squeeze consumers in energy-producing provinces like Alberta. And despite the price spike, oil producers will stay disciplined with their capital spending, limiting the upside to the economy. Overall, we’re forecasting 4.2% retail sales growth this year for the province.  

Chipping in - Young Canadians getting support from parents on homes

How are younger Canadians buying today’s expensive homes? While benchmark home prices in Canada have dipped since 2022, they are still 23% north of pre-pandemic levels. Over the last decade, they are up more than 40%. Further, mortgage rates, while still low by historic norms, have jumped over this period.

A new study by the Bank of Canada shows the rising importance of parental support. The share of mortgages issued to first-time homebuyers that are co-signed by a parent has more than doubled over the last two decades, rising from 4% in 2004 to roughly 11% in 2025. On average, co-signing allowed buyers to purchase homes worth $787,000, whereas they would have only qualified for a $458,000 home on their own (based on Q4 2022 data).

Co-signing, not surprisingly, is most common in the expensive markets of Ontario and B.C. For Alberta, the study published data only on Calgary, which has a lower co-signing rate than Toronto and Vancouver. We suspect Edmonton would be even lower given its even more favourable affordability metrics. Benchmark home prices in Alberta average $505K, fairly close to the qualification limit specified by the Bank.

The good news? Co-signing boosts purchasing power and gives many young Canadians access to the housing market. The bad news? Those without access to such transfers will have a much harder time meeting their down payment. Further, the Bank argues that it can make both parties more vulnerable to a financial shock (e.g. job loss).  

Chart of the Week: Better than last year - Trade uncertainty

It’s bad, but not as bad as last year. That’s the key takeaway on global trade uncertainty.

Like life satisfaction (discussed above), trade tensions are also tricky to measure. But that hasn’t stopped the economics profession from trying. Economists have developed an index to fill a data gap in tracking how trade-related anxieties impact the global economy.

The Trade Policy Uncertainty Index tracks in real-time references to uncertainty, and is strongly linked to economic variables we care about, like GDP and hiring. Here are the latest readings for the world, showing a marked decline since President Trump announced his sweeping “Liberation Day” tariffs.

As for Canada, the more general Economic Policy Uncertainty Index for Canada shows a similar pattern with a marked decline over the last year.

Answer to the previous trivia question: According to the ATB Cormark Capital Markets Spring 2026 Energy Sector Survey, the Keystone XL oil pipeline project is viewed by respondents as more likely to be revived than Northern Gateway.

Today’s trivia question: Sheryl Crow was clearly contemplating life satisfaction data as per this week’s Interesting Fact when she wrote the song “If It Makes You Happy.” When was the track released?