In this week’s The Seven… 

• Front-loading - Consumer spending
• Less scary - Confidence is coming back
• Coping with tariffs - Firms absorbing much of the cost
• Inside out - Premiers talk internal and external trade
• One year later - The recovery in Jasper  
• Unintended consequence - Frac sand gets relief from countertariffs
• Next week: Sidelined - Why a Bank of Canada pause is likely
• Interesting Fact: The Council of the Federation
• Chart of the Week: More rental properties hitting the market

“Must I always be waiting, waiting on you?”

—Jack Johnson,  "Sitting, waiting, wishing”

We wait. The Bank of Canada is waiting for inflation to cooperate before lowering rates, and businesses and consumers anxiously wait for a potential trade ‘deal’ between Canada and the U.S. sometime soon (deadline was August 1, but may be delayed).

On trade, PM Carney is downplaying expectations for a breakthrough, signalling that some type of tariff will remain with us even after a deal is struck. Other countries haven’t escaped U.S. tariffs. Japan agreed to a 15% tariff on its exports this week, while Indonesia and Philippines will be subject to a 19% tariff. The key question for Canada is whether tariff exemptions under the Canada-United-States-Mexico Agreement (CUSMA) remain in place. This exemption has led to a relatively low effective tariff rate for provinces that are not major producers of steel, aluminum and autos (including Alberta).  

On rates, expect the Bank of Canada to stay on the sidelines next week. The inflation readings have simply not been good enough to resume cutting. It is waiting to see how the ever-fluid trade situation unfolds, and for underlying inflation to come down. Looking past the summer, we don’t think the Bank is done cutting this year, but it’s getting pretty close (we forecast two more cuts this year).

We also unpack what’s behind surging housing starts, the recovery in Jasper, the Premiers’ meeting, and why confidence has bounced back.

Beyond the bump - Looking past front-loading effects

Tariffs can lead to some counter-intuitive things, at least at first sight.

By raising prices, tariffs should discourage spending.  But what happens when consumers expect prices to rise more in the future?  They may buy now.

That’s the pattern with vehicle sales, as we’ve noted.  And that factor has been driving spending in Canada and especially Alberta. Netting out autos, Alberta retail sales are up 3.6% so far this year, much weaker than the 5.8% headline growth.

In a separate survey, the BofC shows that more people are staycationing and buying local. In response to U.S. tariffs and related uncertainty, 60% said they are spending more on goods made in Canada (vs. 6% spending less) and 34% said they are spending more vacationing in Canada (vs. 12% spending less).

What’s next? After a tough inflation spell with higher interest rates, tariffs (the uncertainty and the added cost) pose a new headache for consumers. We expect annual retail sales growth to slow as front-loading effects ease, the labour market remains soft and population growth slows. Expect the staycation/buying local theme to continue.

Less scary -  Confidence is improving

The confidence readings are fascinating. Despite the fact we’re in the thick of the trade war, businesses and consumers are saying they are much more confident compared to a few months ago. The Conference Board of Canada’s consumer confidence index for Canada rose for the third straight month to 57.5 in June. That’s still a weak reading, but it’s far better than the 44.2 in March. This week, we reported that small business confidence is back above 50 after plummeting to a record low in March.

A couple theories as to why. One is normalization. Things aren’t actually that much better on the trade front, but perhaps folks are getting acclimatized to the new ‘on and off’ tariff normal. The second is that the economy - both in Canada and the U.S. - has been more resilient than many expected, with some cautious optimism that major projects will get built in Canada.

Next Week - Expect the BofC to extend its pause

A couple things to watch for at this Wednesday’s Bank of Canada rate decision:

First, expect yet another pause (the third straight). They could cut, and we think there is enough evidence to justify a cut mainly in the form of a cooling labour market. But Governor Tiff Macklem and team have been talking tough about maintaining price stability. On Wednesday, Macklem will likely note that underlying inflation is not cooperating. Yes, headline inflation is below 2%, but that’s mainly a lower energy price story with an assist from the retail carbon tax removal on April 1. The Bank is focused on the trend, which has not been their friend. The two main ‘core’ readings tracked by the BofC are sitting at around 3%.

Second, expect the Bank of Canada to get back into the forecasting game as it publishes its Monetary Policy Report (MPR). Recall the last MPR in April when they didn’t publish an official forecast, but instead scenarios (one scenario was meh, but we’re going to be OK; the other one was a serious downturn). Our sense is that it won’t be the same ‘choose your own adventure’ approach, and the Bank will publish a forecast albeit with plenty of caveats.

Expect the comments to be more ‘wait and see’, and that we just don’t know enough. I’ll be doing a word count on “uncertainty” in the MPR (the April MPR referenced the term 49 times).

On the outlook, we’re pretty cautious on Canada with only 1% GDP growth this year in our June forecast. This view reflects cautious business investments and a weakening labour market. Many others have upgraded to closer to 1.5%, and we expect the Bank to fall in the 1-1.5% range.

Stateside, expect the Federal Reserve to hold on Wednesday at 4.25-4.5%. Despite political pressure to cut from President Trump, the Fed will likely conclude that inflation is running too hot (2.7% y/y in June) and tariffs will keep readings elevated.

What to do? When you’ve been tariffed

The Bank of Canada asked that question in its latest business survey . Businesses said they’re doing a variety of things, from changing suppliers to raising prices, but the most common response (69%) is they are taking the hit via tighter margins.   

Unintended consequence - Energy producers get relief from ‘sand’ tariffs

The Canadian countertariffs are intended, in theory, to inflict harm on the U.S. with minimal damage to Canada.

Easier said than done. Take, for example, frac sand used by oil and gas supply challenges, companies rely heavily on frac sand from Wisconsin. That came under Canadian countertariffs, raising costs to producers (according to Enserva, an industry association, the costs would be $275 million over a full year).

After some consultation, producers can now claim a remission on frac sand countertariffs - good news for an industry that is now facing lower prices from a wobbly global economy and a return of OPEC+ supply.

Summer sizzle - Premiers talk trade, getting stuff built

The premiers wrapped up their Council of the Federation meeting in Huntsville, Ontario, on July 23, 2025 with PM Carney making an appearance.

In a country as large and diverse in Canada, it’s tough to land on concrete action at these consensus-based meetings.

That said, there were some pretty clear takeaways and more unified approach than usual given U.S. trade threats, namely:

• Protecting Canada from U.S. tariffs - With a looming August 1 deadline, Prime Minister Mark Carney seems to be tempering expectations for a breakthrough and that we’ll likely be left with some level of U.S. tariffs. 
• Boosting the Canadian economy - British Columbia, Ontario, Manitoba, and Yukon signed new agreements to make it easier for skilled workers to move between provinces. Ontario, Alberta, and Saskatchewan teamed up on an agreement to build new pipelines and rail lines using Canadian steel and shipping vital minerals from Ontario's "Ring of Fire" region west. Prime Minister Carney highlighted the federal "One Canadian Economy Act" (Bill C-5) to speed up national projects.
• Indigenous partnership - Premiers met with Indigenous leaders to discuss Indigenous concerns on fast-tracking development, agreeing on the need for consultation and opportunities for equity partnerships.

Seems like leaders are mostly singing from the same song sheet. But there is much to come. In particular, what national projects list will receive fast tracking under Bill C-5? Relevant to Alberta, will energy infrastructure projects be on that list?

One year later:  Tourists coming back, but Jasper still recovering

Jasper National Park and the town of Jasper are still in the active process of recovery following the devastating wildfires of July 2024. While progress has been made, notably clearing debris and setting up interim housing, it is still not business as usual. A key factor is that accommodation supply is down about 20% from regular levels, and there is a shortage of housing to accommodate workers. We don’t have visitor stats yet for July, but operators are noting a dip from normal levels.

In 2024, visits to Jasper national park fell to only 1.1 million, down from 2.2 million in 2023 due to the toll of the wildfires. But a recovery is taking shape. In the first half of 2025, Jasper national park visits were 667,730, down 12.4% versus the same time last year. More recent months have shown a notable improvement (see chart).

On a personal note, our family has been back a few times since the fires. The stunning scenery and warm hospitality has not changed.