In this week’s The Seven…

• Better than expected - GDP growth in May
• Watchful thinking - U.S. interest rates
• If it makes you happy - Money and happiness
• Interesting Fact - The energy footprint of individual AI queries
• Chart of the Week - Trade growth

“Summer breeze makes me feel fine

Blowin' through the jasmine in my mind”

—"Summer Breeze" by Seals and Crofts

It’s not even August yet, but I’ve spotted multiple “Back to School” displays and ads. Too soon! (I don’t have little ones running around; those who do might have a different perspective on this.)

Looking back at July, it was a busy month for economic news.

The Canada-United States-Mexico Agreement survived its first mandatory review, but the U.S. didn’t want to extend its term past 2036 and the agreement is now subject to an annual review process. This was not the vote of confidence Canada was hoping for from the U.S., highlighting the fragile nature of trade relations between the two countries. Just this week, President Trump said he’d “rather be independent” when it comes to a free trade deal with Canada and Mexico. The negative rhetoric comes after the President announced a new 50% tariff on about $28 billion worth of Canadian goods that is slated to take effect on August 19.

The violence in the Middle East escalated again in July, with the hoped-for full reopening of the Strait of Hormuz still on hold. Oil prices went back up along with the risk that inflation will require higher interest rates at some point.

With regard to the latter, both the Bank of Canada and the U.S. Federal Reserve elected to leave their policy interest rates as is. The Bank of Canada is under less pressure to raise rates than the Fed, with inflation not as strong as it is south of the border, despite some methodological differences.

We also got more details about the proposed oil pipeline from Alberta to the B.C. coast and the Pathways carbon capture project. Meta, meanwhile, announced that it is planning to build a giant data centre in Sturgeon County.

To top it off, this morning’s GDP report for May was surprisingly strong.

August might end up being a slower month for major economic news, but then again…

Better than expected - Canada’s GDP in May

We’ve been describing Canada’s economic growth over the last year as “tepid,” “sluggish” and “wobbly.” It’s still not worthy of a gold star, but GDP growth has picked up nicely in April and May.

In fact, today’s GDP by industry report from Statistics Canada shows that the economy expanded by 0.3% in May, better than the 0.1% advance estimate.

Led by oil and gas, and helped along by increased activity associated with the 2026 Census, the growth was broad-based. If the estimates hold, Canada is on track to post over 3% growth (annualized) in the second quarter. That’s more like it, but sustaining the pace will be difficult with U.S. tariffs about to get worse rather than better and the impact of major projects still largely hypothetical at this stage.  

If it makes you happy - Money and happiness

Having money does not guarantee our happiness any more than a lack of it automatically condemns us to despair. But this doesn’t mean that money doesn’t matter to our happiness because it most assuredly does. (It’s dated, but we did a survey of Albertans back in 2015 that shows this to be the case.)

A lack of financial resources can make life very hard and block access to the things that do make us happy, such as health care, leisure time, being able to help out our kids, and so on.

This is why I bristle when reading news articles that include lines like “common wisdom says that money can’t buy happiness.” It makes it sound like reducing poverty, keeping inflation in check, creating jobs, providing affordable housing, and raising living standards are somehow not important goals.

With this in mind, a recent report put together by the digital financial services company Remitly measures how the “price of happiness” (i.e., the income point after which further increases no longer improve a person's self-reported "subjective well-being" score) varies from place to place.

The “price of happiness” was found to be the highest in Iceland and the lowest in Ethiopia, with Canada coming in at 14th. Slovenia is the only country in the study where the price of happiness ($36,769 USD) is less than average annual wages ($42,754 USD). In Canada, the average annual wage is only 44% of the average price of happiness.  

Looking at Canadian cities, Victoria has the highest price of happiness, followed by Vancouver and Toronto. Calgary is 5th on the list and Edmonton 12th.  

Interesting Fact: How much electricity does a large language model query use?

According to a recent report from Our World in Data, asking a large language model (LLM) such as ChatGPT, Gemini, or Claude a question uses about 0.3 watt-hours (Wh) of electricity or roughly what a microwave uses in one second. (The electricity in question is what’s used by AI data centres, not the energy consumed by the device used to access the AI tool.) The chart below compares this to the energy use associated with other activities. Note that other AI tools are more energy-intensive. For example, a standard request to an AI agent is estimated to consume around 1.1 Wh, with an agentic request with reasoning using around 50 Wh.

Chart of the Week: Global trade growth

With U.S. tariffs back in the news, it’s worthwhile to remind ourselves of the path global trade has been on and how it has exploded over the last half-century. As our Chart of the Week shows, the real value of global trade was 646% higher in 2024 than in 1975. The global population has grown over this period, but more people does not automatically translate into more trade. First and foremost, traders and governments have to think it is worthwhile.

Two other key factors help explain the increase: 1) Technology has made trade easier, enabled supply chains to become more integrated, and expanded the range of products and services available to exchange. 2) Trade liberalization has reduced the artificial barriers to the movement of goods and services that governments create. Many of these barriers remain, including the new ones erected by the U.S., but they are not the impediment they once were.  

Answer to the previous trivia question: Microsoft Excel came on the market in 1985.

Today’s trivia question: When was “Can’t Buy Me Love” by The Beatles released?