In this week’s The Seven…

• Ceasefire - The Iran-U.S. MOU
• Warsh shock - New Fed chair sends hawks flying
• Great White North - G7 leaders point to Canada amid energy crisis
• Resilient consumers - Retail sales increase again…but risks loom
• Trade as relationship - Indigenous entrepreneurship in Alberta
• Interesting Fact - Economics of the World Cup
• Chart of the Week - Where did all the natural increase go?
  
  

“To everything (turn, turn, turn) 

There is a season (turn, turn, turn)”

Turn! Turn! Turn! (To Everything There Is a Season), the Byrds (1965)


Now what’s your forecast? 

That’s the question I was fielding this week, as news broke late last week that the U.S. and Iran had reached a deal (I mean MOU) to reopen the Strait of Hormuz. 

Our quarterly Alberta forecast was prepared shortly before the MOU, so it’s a natural question. 

My answer? Our outlook remains unchanged because we 1) already took a conservative approach to oil prices, 2) the economic data continues to reinforce our forecast (including population and retail this week), and 3) oil prices have less torque on the real economy than in the past and this cycle looks different as I discussed yesterday.  

That doesn’t mean we’re not watching what’s happening. A lot of things, beyond oil prices, will cause us to change our next quarterly forecast - everything from the CUSMA review to the status of the Alberta-Canada MOU. In the meantime, we publish low/high scenarios to deal with risk. 

But for now, we take a step back to see how things shake out before adjusting our view. The world will keep turning, but we’re not changing our outlook with every turn.

Starting point - More diplomatic work needed after MOU

Details have emerged on the Iran-U.S. Memorandum of Understanding (MOU). There are three main components 1) 60-day ceasefire to negotiate on nuclear stockpiles 2) reopening of the Strait, and 3) sanctions and asset relief.

A breakthrough yes, but it’s going to be a bumpy ride. Negotiations seem to have hit another snag as Israel launched another round of attacks in Lebanon, resulting in the postponement of talks scheduled today.

With the Strait reopening, oil prices ground lower this week and sit at $US76bbl at the time of writing. Our view is still that the massive supply disruptions of physical barrels and increased geopolitical risks means prices will remain higher than pre-war levels. Oil futures suggest approx. $80/bbl average WTI in 2026 and $70/bbl in 2027 - roughly in line with our June forecast and still well above the $60/bbl we had penciled in pre-war.

Seizing the moment - G7 leaders highlight Canada as a solution to energy crisis

News of the U.S.-Iran MOU broke during the G7 Summit in Évian, France.

G7 leaders announced a new wave of sanctions against Russia, committed to a joint Anglo-French naval mine-clearing mission in the Gulf, and formalized a pact to reduce reliance on Chinese rare-earth minerals to under 60% by 2030, with no single country supplying more than 60% of their imports of rare earths. 

But the main thing for Canada was a joint acknowledgement of Canada as a secure and stable jurisdiction for energy amid the latest crisis:

"We commit to accelerate the diversification of energy supply routes in order to reduce global vulnerability to the Strait of Hormuz and to increase our energy stocks. We welcome the potential for Canada to deliver significant additional capacity to global markets in the coming years."

New Fed Chair Warsh spooks markets on “hawkish” tone

"We've dropped forward guidance... As a general proposition, forward guidance isn't the business we should be in." Fed Chair Kevin Warsh, June 17. 

All eyes were on Kevin Warsh this week, the new chair of the U.S. Federal Reserve, as he delivered his first rate decision.

It’s not what he did, but what he said (or didn’t say). The decision to keep the benchmark rate at 3.5-3.75% was widely expected. 

The shock came from the ‘hawkish’ tone and lack of forward guidance. Unlike his predecessor Jerome Powell who signaled upcoming moves, Warsh kept markets guessing with his wait and see, data-driven approach. He also said that he’s focused on the “left of the decimal point” on inflation - suggesting an intolerance for inflation remaining above its 2% target (right now it’s 4.2%, while the core measure is 2.9%). Finally, he didn’t submit his “dot plot” forecast for rates, suggesting that he won’t stand in the way of a consensus view to hike. Right now that updated dot plot points to a rate hike by the end of the year.

U.S. stock markets slid on the news, while U.S. 2 and 10-year yields jumped, widening the spread against Canadian yields. 

Bottom line: President Trump had concerns about Powell’s reluctance to cut rates. The new chair, Warsh, appears to be standing firm, with rate hikes more likely than not to get inflation under control.

Consumers resilient…for now 

Canadian retail sales accelerated in Q1 and posted another jump in April (+0.5% month over month), lifted by higher spending at gasoline stations (due to higher prices). Alberta retail sales are especially strong - up 6.5% so far this year, versus 3.1% nationally.

However, slower population growth and cost of living pressures remain a headwind. We expect these gains to moderate, as more disposable income gets eaten up by energy costs. More importantly, with the consumer under pressure, more of the growth in Canada will need to come from business investment and exports.

In response to higher energy prices, the Government of Alberta announced an energy rebate this week to be delivered July 1 ($100 per adult in households earning less than $225K/year). It’s replacing the previously scheduled fuel tax holiday, providing a partial offset to the recent price spike. A fuel tax holiday would have lowered the provincial CPI inflation rate, while this measure provides more general income support.

We will look into today’s retail numbers in more detail next week. 

National Indigenous Peoples Day - Trade as relationship

In recognition of National Indigenous Peoples Day this weekend (Sunday, June 21), let's take another look at the strength of Indigenous entrepreneurship in Alberta.

A recent joint report by the Canadian Chamber of Commerce’s Business Data Lab, ATB Financial, and the Canadian Council for Indigenous Business shows that Alberta’s Indigenous economy generated nearly $10 billion in gross income in 2022. While the majority of Indigenous-owned firms remain rooted in local markets, there is a core of 150 to 170 Indigenous enterprises across Canada that export annually. Alberta was home to approximately 15% of all Indigenous-owned exporters in Canada, while their share of the total value of Indigenous exports was 9%.

Read more of the report’s findings in this Twenty-Four.

Interesting Fact: Economics of the World Cup

FIFA’s socioeconomic impact analysis of the 2026 World Cup projects that global attendance is expected to reach 6.5 million people—40% of whom are foreign tourists—driving a total expenditure of $13.9 billion. Tourism spending accounts for 54% of that total, while direct FIFA expenditures make up 27%.

In Canada, the tournament is expected to provide a lift in GDP, with a FIFA-commissioned report breaking down the positive economic impacts. However, measuring ROI is tricky and often overstated by "displaced spending," since local spending at the stadium just shifts existing money rather than generating new revenue like foreign tourism does. 

The expected multi-billion dollar windfall remains uncertain. Hotel bookings and ticket sales are falling short in both the U.S. and Canada, largely due to hotels inflating their prices, leaving people priced out of the event.

As always, benefits need to be weighed against the costs. According to the Parliamentary Budget Office, the total bill is likely to amount to just over a billion dollars in Canada, approximately $82 million per game.

Chart of the Week: Where did all the natural increase go?

With the arrival of first quarter population estimates this week, our commentary focused on  yet another decline in the Canadian population due to fewer non-permanent residents.

But there’s another factor that’s more structural, and won’t bounce back once immigration patterns normalize – natural increase (births minus deaths). The combination of an aging population and lower fertility rates means that Canada’s population is barely growing naturally (in fact, natural increase turned negative in the last two quarters). We have shown previously that, by the end of the decade, Canada’s population will shrink without immigration. 

In today’s Chart of the Week we show the massive regional variation in natural increase across the country. The older Atlantic provinces have, for some time, had more deaths than births. B.C. is in that category, and has been joined by Quebec. The remaining regions with natural increase are in the Prairies (led by Alberta), Ontario and the territories.

Births and deaths are highly seasonal (see Trivia) - as such, we take a 4-quarter moving average to smooth things out.

Answer to the previous trivia question: False. Alberta employment in professional, scientific and technical services now far exceeds employment in the oil and gas extraction sector. The two lines intersected in October 2014.

Today’s trivia question: Births are more seasonal than you may realize. In what quarter of the year are births the highest in Canada?