In this week’s The Seven… 

• Not bad, not great - Retail sales 
• Iffy data - U.S. CPI
• Under pressure - Softwood lumber industry
• Interesting Fact: The world’s largest producer of coal and solar power
• Top economic stories of 2025 - The first 5
• Chart of the Week: The sleeper pick of 2025 - Tourism!

"There are places I'll remember

All my life, though some have changed

Some forever, not for better

Some have gone and some remain"

—The Beatles, “In My Life”

What a year! Some things were not for the better - tariffs and U.S. protectionism. But the resiliency of the economy in the late stages of 2025, and the response in Canada (build more faster, expand overseas, freer internal trade) provides hope this holiday season.

We’re doing something different today. In the final Seven of the year, we’ll be brief on the regular economic updates and then give you 5 of our top 10 economic stories from an Alberta perspective of 2025. 

Looking for the next five? Stay tuned for Monday’s Twenty-Four.

Before we dive in, a special note of thanks to you - our readers. You have journeyed with us this year through choppy economic waters. We didn’t always have the answers, but we tried to keep you informed. Amid the uncertainty, our goal was to tell you what we knew, when we knew it.

Next year, our plan is to deliver more high quality ‘on the ground’ insights. If you have any ideas or comments, shoot us a note at thetwentyfourseven@ATB.com. We always appreciate hearing from our readers.

Happy holidays from the Economics Team!

Hot off the press - Consumers remain cautious

Today’s retail sales report shows that Canadian consumers (including in Alberta) dialed back their spending for the second month in a row in October - a continuation of the ‘moving sideways’ trend we have seen since the start of the year. This comes after a run-up in sales in late 2024.

We expect Alberta consumers to remain cautious in 2026 owing to economic uncertainty and ongoing cost of living challenges, even as the labour market improves. Our forecast is for annual Alberta retail sales growth to slow from an estimated 4.6% in 2025 to 4.2% in 2026 before rising by 5.2% in 2027.

U.S. inflation - It’s down, but the data is “iffy”

One of the casualties of the U.S. government shutdown was economic data. Simply put, there was not much of it during the shutdown. Policymakers like the Federal Reserve Board were flying blind. Even now, the data coming in is, to put it technically, "iffy."

On the surface, the U.S. inflation report this week was a good news story. Annual inflation in November dropped to 2.7% (down from 3.0% in September with no rate published for October).

But curb your enthusiasm, at least for now. First, there is missing data. Because of the October shutdown, the government had to "impute" some prices like shelter costs. Second, there is a holiday bias: data collection only resumed in mid-November, capturing heavy Black Friday discounts. This may have created a downward bias on the readings.

Our verdict? The Federal Reserve should view this as a "placeholder" report and wait for December's data to more clearly see the post-shutdown reality of inflation. The market is currently pricing in about two more Fed rate cuts next year.

Under pressure: Canada’s softwood lumber industry

CUSMA tariff exemptions have been the saving grace for the economy overall this year. But it’s important to remember some sectors are getting hit much harder from U.S. protectionism, and do not benefit from such carve outs.

Last week, we dug into the ongoing softwood lumber dispute, which dates back four decades. With combined U.S. tariffs and duties now in excess of 45% and market conditions soft, the lumber industry in Canada is facing extreme headwinds. In a BNN Bloomberg interview, I argued that recent government efforts to bolster domestic demand and expand overseas will help. But in the near term, the most pressing issue is resolving the trade dispute with the United States. The industry would also benefit from a pick up in U.S. home construction. Two recent examples of the challenges: West Fraser announced it will close its 100 Mile House lumber mill in B.C. by the end of the year. It is also indefinitely curtailing OSB operations by the spring of 2026 at its High Level, Alberta facility.

These tariffs not only hurt Canadian lumber producers, they raise the cost of U.S. housing at a time of affordability challenges, and also at a time when California needs to rebuild following its devastating wildfires.

Now, for our top economic stories of 2025 (in no particular order, though the first one is the top story):

1. Tariff turbulence: U.S. protectionism

What’s old is new again. U.S. President Donald Trump disrupted the global trade order when he brought in sweeping tariffs - the highest since the mid-1930s under Franklin D. Roosevelt - with the goal of reshoring U.S. manufacturing jobs and raising revenue.

In Canada, tariff threats turned to Executive Orders in early February. Then came so-called “Liberation Day” on April 2, which took the trade war global.

But it could have been worse. Canada is exempt from the general 35% tariff if exporters are in compliance with the Canada-United States-Mexico Agreement (CUSMA). The end result is that we estimate an effective tariff rate on Canada at around 6%, lower than the global average of 17%.

The businesses hardest hit are the ones facing sector specific tariffs not CUSMA exempt, including steel, aluminum, lumber (and wood furniture), copper and autos. The provinces most exposed have a higher dependency on those industries, including Ontario, Quebec and British Columbia. We estimate that Alberta sits at a 1.7% effective tariff rate, lowest among provinces.

Trump’s tariffs completely changed the trajectory of 2025.  It explains a lot of what happened this year: why Canadians stopped travelling to the U.S. and instead travelled inside Canada (see Chart of Week); why some sectors like steel and lumber struggled; and why Canadian policy makers moved faster than normal on addressing longstanding economic challenges (e.g. weak investment and productivity, internal trade barriers).

2. The pendulum swings - Population growth cools

After COVID, Canada’s population exploded. The influx was driven by non-permanent residents (NPRs), including temporary foreign workers and international students.

In 2024, Canada’s population grew by 1.2 million - an increase of 3%!

That same year - faced with rising unemployment and housing shortages - the federal government announced major changes to immigration policy, mainly in the form of reduced NPRs, but also in the number of permanent immigrants.

The result? Population growth slowed to a crawl. In fact, in the third quarter of 2025, Canada’s population declined for the first time on record (back to 1947) outside of COVID.*

Only one province grew last quarter - Alberta. While all provinces added permanent immigrants, Alberta was able to overcome the loss of non-permanent residents via strong natural increase (births less deaths) and gains from interprovincial migration with the latter a function of a faster growing economy and relative housing affordability.

*In 2020, there was a very slight decline in Q3, but only by 1.2K people.That’s -0.003%, so the population was effectively flat.

3. A whole new world - First LNG shipments depart Canada’s west coast

The last two years have brought a structural shift in the Canadian energy landscape: Canada has made significant progress exporting its energy outside the U.S., namely to Asia.

2024 was about oil, with the Trans Mountain Expansion paving the way to record shipments to China.

2025 was about natural gas, with LNG Canada phase 1 putting Canada on the global LNG map. On June 30, 2025, the first tanker left Kitimat.

Canada started late (the U.S. has been ramping up LNG over the last decade), but is finally in the game. The country has advantages over the U.S. that it is finally capitalizing on, including colder temperatures (reduces energy for liquefaction), lower-cost gas, and shorter shipping times.  

5. Playing catch up - Alberta housing starts hit a record

Remember the home construction frenzy of 2005-2007 in Alberta? I do - I bought a home at the peak of the cycle. Well, it turns out Alberta will start more homes in 2025 than we did even back then.

The industry has been catching up to the population explosion, with a major build out of multi-family and rental purpose homes with the assistance of government programs (notably CMHC’s MLI Select).

With only one month to go, Alberta is more than on pace to set a new record for Alberta housing starts. Our forecast is 55,000 new homes. Any guess what the next highest year was? 2006 when there were 48,962 starts. 

Stay tuned for the next top 5 stories of 2025 on Monday.

Interesting Fact: China is, by far, the largest global producer of coal-fired power AND solar power

One argument for exporting Canadian LNG is that it can help displace higher-emitting coal in other countries like China.

As of July 2025, 55% of the power generated from coal worldwide came from China’s 3,269 power plants. Further, there were 354 more plants in China under construction, representing 83% of the new units underway globally.

It’s not just coal. China is also leading in solar power. According to the Visual Capitalist, China has 48% of the world’s operational solar capacity, and accounts for 35% of the planned additions to new solar capacity.

Chart of the Week: The sleeper pick of 2025 - Tourism!

Amid the trade war mayhem, tourism is a sector that’s easy to overlook. It shouldn’t be. It’s a major industry that quietly had a great year.

While tourism didn’t make our official top 10 list (mostly because it’s part of the trade war story), it gets a shout out in our Chart of the Week.

Here’s what you need to know about Alberta tourism this year:

Foreign spending jumped. In the second quarter of 2025, there was a whopping 25% year-over-year increase in spending in Alberta by non-resident visitors to Canada. Sizable gains came from both American and overseas tourists. The first quarter was quieter, but that stellar second quarter meant spending was up 18% in the first half over the same time in 2024.

More visitors from abroad, including more Americans. Using more timely data, entries into Alberta from international destinations were up 11% year-to-date (YTD) through September, including a 7.8% increase from Americans and 21% from other (non-U.S.) foreign travellers. Alberta is far outpacing other provinces, with non-resident entries into Canada roughly flat this year (-0.2% year-to-date).

U.S. travel boycott? At the same time, fewer Canadians are travelling stateside, and the most obvious explanation is a protest to U.S. trade actions. The drop is 9.9% YTD among folks leaving Alberta. But it’s been a much sharper pullback elsewhere in the country. Nationwide, Canadian travel to the U.S. is down 25% YTD.

Keeping it local. Alberta tourist destinations are popular, but sometimes that means it’s hard to find enough product (industry speak for hotels, conference venues, restaurants, etc.) to meet the demand, especially at peak season.

One idea is to create more all-season destinations, which is exactly what the Alberta government has recently designated for Nakiska, Castle, and Fortress.

A side benefit is also to keep more spending at home. As we’ve discussed, Alberta runs a travel deficit with B.C. That is, Albertans spend more money when travelling to BC, than British Columbians spend in Alberta - a travel deficit of about $1.2 billion using 2019 data (latest available). B.C. is known for its own all-season resorts. What if Alberta could provide something similar?

Answer to the previous trivia question: It’s true! Christmas nutcrackers were originally able to crack actual nuts with their teeth.

Today’s trivia question: Although technically not a “Christmas movie” like Die Hard, this 1965 musical set in Austria is a holiday favourite of many.