In this week’s The Seven… 

• Making a little less stuff - Manufacturing
• Next week: Inflation in July
• A fly on the wall: The Bank of Canada’s interest rate deliberations
• Avoiding the neighbours - Canadian travel to the U.S.
• Interesting Fact: Economic anxiety
• Chart of the Week: Rent reduction

Overall, Canada’s economy is not doing very well. With annual growth forecast at around 1% and the unemployment rate expected to average 6.9%, 2025 will go down as a weak year. But, as with many other things, individual results will vary.

It will still be a rough year in Alberta, but strong oil production and residential construction activity and less exposure to sectoral tariffs are expected to help push provincial growth higher than the national average.

If you are a U.S. business that relies on Canadians crossing the border, the large drop in visits to the U.S. is a major setback. For the Canadian businesses that benefit from the spending of the Canadians who stay home, it’s a helpful boost.

Similarly, stock market indexes are setting new records, but this is cold comfort for Albertans aged 15-24 facing an unemployment rate in July of over 20%.

While it’s good news that most Alberta products are able to still enter the U.S. tariff-free due to the exemption for CUSMA-compliant goods, it’s bad news for canola farmers who were just hit with a 76% Chinese tariff on Canadian canola seed.

And, as our Chart of the Week illustrates, lower rents are welcome news for renters but could be a problem for property owners trying to cover costs.

As with so many things, how the economy is going depends on who you ask.

Reduced volume - Manufacturing over the first half of the year

Manufacturing data* released this morning show that national sales fell by 0.8% over the first half of the year compared to the same period in 2024. In volume terms, sales were down by 2.9%. Estimated volumes were down in the three largest subsectors at -1.9% for food products, -2.3% for transportation products and -7.2% for petroleum products.

According to Statistics Canada, “While the precise sales lost due to the tariffs cannot be quantified, data indicate that the primary metal, machinery, fabricated metal and transportation equipment subsectors were among the most affected in June. Relative to other provinces, Ontario experienced the largest decline in sales attributable to the tariffs.”

In Alberta, year-to-date revenue was down by 2.3%. The pullback was driven in large part by a 9.2% decline in petroleum product sales, a 3.4% drop in food products sales and a 10.9% fall in fabricated metal product sales. Volumetric data are not available by province, but our estimates indicate that the drop in petroleum product sales was due to a roughly even split between lower prices and lower volumes.

Sales over the back half of the year will continue to depend on price movements (especially gasoline) and how the trade war plays out. If sectoral tariffs are reduced or removed, this will have a strong positive impact on Canada's auto sector and sectors that use steel and aluminum.

*This section refers to the seasonally adjusted data.

Next week: Consumer price inflation in July

Statistics Canada will be releasing the inflation numbers for July on Tuesday morning. As with the June report, which pegged the national year-over-year inflation at 1.9%, lower gasoline prices and the removal of the consumer carbon tax will keep a lid on overall price growth. Although we’ve been talking about tariffs for months, it is still early days in terms of the flow-through effect on consumer prices. We will, nonetheless, be scouring the details of the report for tariff impacts and other signs of what’s next for prices in Canada and how this may affect the Bank of Canada’s decision whether or not to cut its trendsetting policy interest rate.

A fly on the wall: The Bank of Canada still not sure what to do

Speaking of the Bank of Canada, its governing body meets ahead of the scheduled interest rate announcements to figure out what it should do. Released on Wednesday, a summary of the “deliberations” that led to the decision announced on July 30 to leave the policy interest rate alone at 2.75% points to a Governing Council that believed the risk of an uptick in inflation outweighed providing a struggling but “resilient” Canadian economy with a boost. Put another way, the Bank is still waiting to see how the trade war plays out before risking an interest rate cut that could add to a potential increase in consumer prices.

The decision to stay on pause came despite the acknowledgement that all three of the Bank’s own economic scenarios—including one in which the trade war escalates—show inflation remaining within the target range. A number of concerns about the potential for inflation to break out of the target range were expressed including that “it was too early to tell how much and how quickly cost increases from tariffs and trade disruptions would be passed on to consumer prices.”

The Council seemed divided on whether or not the Bank had “already provided sufficient support” via past interest rate cuts to assist the economy through the trade war. In the end, “members agreed they would need to wait for more clarity before drawing firm conclusions.”

Although inflation pressures appear lower in Canada, unlike its U.S. counterpart, the Bank of Canada is not dealing with a president (in our case, prime minister) publicly demanding rate cuts so it arguably has more room to stay on pause for now. The next Bank of Canada interest rate announcement is scheduled for September 17.

Staying put: Canadian travel to the U.S.

The latest travel numbers highlight the dramatic drop in travel to the U.S. by Canadians during the trade war.

To be clear, lots of Canadians still head south of the border with over 13.4 million visits recorded between January and July 2025. That number, however, is five million visits below where things stood at the same point last year (-27%). In Alberta, visits to the U.S. were down by 12% or about 117,000 year-to-date through July.

The drop in visits is in keeping with various polls that indicate many Canadians are avoiding or reducing travel to the U.S. According to a recent Bank of Canada survey, about 55% of respondents said they’re planning to spend less on vacations to U.S. destinations “in response to uncertainty about trade relationships or tariffs between Canada and the United States.”

Although visits by Canadian residents to countries other than the U.S. are up and visits by foreign residents to Canada (both American and non-American) are down, the net result is still a lot more Canadians staying in the country and, presumably, spending dollars they would have spent in the U.S. here in Canada.

Chart of the Week: Rent reduction

According to the latest data from Rentals.ca, average asking rent in Canada was $2,121 in July—a drop of 3.7% compared to 12 months earlier. In Alberta, rent was down by 7.3% to $1,845. The pullback was greater in Calgary than in Edmonton. Average asking rent in Calgary fell by 11.6% to $1,969 versus a drop of 2.0% to $1,667 in the provincial capital.

This is positive news for renters, less so for property owners (it depends who you ask).

As our Chart of the Week shows, the improvement in affordability in Alberta, is less impressive when viewed against the steep increases in rent over the last few years. Excluding houses and townhouses, average asking rent in Alberta this July was 27.4% higher than three years earlier. Once again, there is a significant difference between Calgary and Edmonton, with the average asking rent of apartments and condos 9.1% higher in Calgary than in 2022 versus 27.1% in Edmonton. Despite the increase, Edmonton still has the lowest rent among Canada’s six largest markets.

Answer to the previous trivia question: The U.S. Bureau of Labor Statistics (née Bureau of Labor) was created in 1884.

Today’s trivia question: In what year did the U.S. purchase Alaska from Russia?