In this week’s The Seven… 

• Two-minute outlook - Our latest forecast for Alberta
• Tariff hit - National GDP in April
• Desensitized - Are we getting used to uncertainty?
• Interesting Fact #1: Turning carbon into cement
• Interesting Fact #2: About Drayton Valley
• Chart of the Week: Renaissance in food manufacturing
• Happy Canada Day!

I know it’s cliche to say ‘time flies’ but honestly what just happened? I say this not believing we’re actually at the mid-year point of 2025. But that’s what my calendar says, so let's take stock. 

The first half of the year has been, well, meh. Turns out time also flies when you’re not having fun. I spent much of this year glued to my screen scanning tariff news, much like I did tracking COVID stats during the pandemic.

Whipsawed by Trump’s ‘on and off’ approach, we went from targeted tariffs on Mexico and Canada in February (with 51st state threats mixed in), the trade war going global in April, and now inching towards potential bilateral deals today. On the homefront, a new federal government was elected and promises to build big things, make Canada the strongest G7 economy and an energy superpower—all spurred by the Trump threat.

The outlook seems fraught with risks. And yet, despite trade shocks now reverberating through the Canadian and Alberta economy, we’re feeling a tad more optimistic today than we were in the spring.

Our latest outlook—the main economic event of the week (our view)—shows that Alberta’s economy is now expected to expand by 1.9% this year—better than the 1.5% we were thinking in March. We expect things to be pretty sluggish the rest of the year, before picking up in 2026. Alberta has been hobbled by trade turmoil and the outlook for oil prices has softened. Yet it should fare better than other provinces due a lower direct tariff hit, rising energy exports, booming home construction and continued interprovincial migration.

We spent most of the first half looking outwards—predominantly trying to predict President Trump’s next move. As we head into Canada Day, my hunch is we’ll be looking more inwards. Canadians are looking for action on tackling longstanding Canadian issues that pre-date Trump 2.0—accessing overseas markets, building major projects and knocking down interprovincial trade barriers. Action on these files is something we’re watching closely.

Tariffs hit GDP in April - Second quarter tracking negative

Adding to the urgency to get stuff done, the Canadian economy is now contracting.

The hard data is catching up with the soft sentiment numbers. Canada’s real GDP edged lower in April by 0.1% and the preliminary estimate for May is also for 0.1% decrease. With U.S. tariffs in play, it is not surprising that the decline was concentrated in the manufacturing (-1.9%) and wholesale (-1.9%) sectors.

Add it all up, and Canada is on pace to see a small contraction in second-quarter output - exactly in line with our forecast released yesterday. We also see a small dip in Q3. But given the strong first quarter (mainly front-loading effects to get in front of tariffs) and an expected rebound in Q4, we expect growth averaging out to 1% for the year.   

Our two-minute* outlook

Don’t have time to read our riveting 12-page outlook (you should, there are cool interactive charts)? Here are a few key points:

Better than before. Our outlook has improved since March, with growth upgraded to 1.9% in 2025 and 2.2% in 2026 (vs. 1.5% and 1.9% before).

Still modest. Our growth forecast is much stronger than our 1% national forecast. But keep in mind we’re expecting 2.5% population growth, so it’s a decline in per capita terms. Trade and policy uncertainty is holding back investment and hiring.

Labour market challenges. With so many people coming to Alberta and employers cautious, the unemployment rate will stay elevated. Yet there are shortages in some areas, notably the trades.

It’s energy, but other stuff too. Oil production will continue to be a major driver of growth, but don’t forget about the longer-term diversification story. We’re getting significant contributions from emerging sectors like food manufacturing (see below), tech, and tourism.

Building homes. Alberta is on pace to post the highest level of housing starts on record, thanks to a surge in multi-family units. With the population boost, people need homes and builders have thankfully stepped up to the plate.

Bank of Canada not to the rescue. We now think there are only two rate cuts coming from the Bank of Canada. Macklem and company seem more hawkish these days - they need to be convinced that underlying price pressures are easing and so far they aren’t. Either way, the story is the same, the Bank of Canada isn’t coming to save the day like in typical downturns with aggressive rate cuts.

Next challenge - getting things built. We should not forget that there was a key structural problem in Canada’s economy, even before Trump 2.0 – a lack of private capital investment, which was holding back labour productivity. With federal promises to fast-track major projects, we’re watching this one closely. If there is upside to our forecast, this is it.

*Friday fun: According to Radio X in the UK, the best song under two minutes is “I will” by Radiohead (great band).

Business sentiment is improving, but why?

The data on sentiment is interesting to watch.

In the heat of the Trump tariff threats, business confidence in Canada plummeted. The CFIB’s Business Barometer® long-term index* hit its lowest level on record in March 2025 (even below COVID levels!).

Fast forward to June, and the index swung back. Still below January, but well off its bottom.

The obvious explanation is that the tariff situation has turned out way better than many were expecting. Recall, at one point, that a blanket 25% tariff (10% energy) was on the table. Businesses seem to think we’ve skated by that initial threat and are heading to a new normal that looks less troubling.

Is there another explanation? Research shows that sentiment is weakest when uncertainty is at its peak. It’s fair to say things were more uncertain then than now.

But that explanation still doesn’t leave me satisfied.  After all, things are still pretty uncertain—the Economic Policy Uncertainty Index for Canada has not improved nearly as much as the sentiment readings.

Is it possible that uncertainty has become the norm, and folks have adjusted their expectations? A form of acclimatization or desensitization? I don’t have the answer, but it seems like a good project for an economics student.

*The long-term optimism index is based on how businesses expect to be performing in 12 months.  

Interesting Fact #1: Calgary company turning carbon into cement

Did you know that carbon emissions can be sequestered in cement? Recently profiled in the Calgary Herald, that’s what Calgary’s Carbon Upcycling is doing. In partnership with BURNCO Rock Products and Lafarge Canada, the company’s two demonstration plants take coal ash from landfills and CO2 emissions from a natural gas power plant and turn it into “supplementary cementitious materials” that can reduce the carbon emissions of traditional cement blends by up to 60%.

Interesting Fact #2: About Drayton Valley

I was in Drayton Valley this week, a town of approximately 8,000 and a hub for the conventional oil and gas sector. I was struck by the entrepreneurial spirit and resiliency of this town. The community has overcome a series of obstacles over the last decade - the 2015-16 energy downturn, COVID in 2020 and the wildfires in 2023. And yet, the population has more than bounced back to a new high, according to the latest population estimates by Alberta Treasury Board and Finance.

Situated on the Pembina Oil field, energy is the lifeblood of the community. A key discovery was the Pembina No. 1 oil well on February 23, 1953. Forestry (the Weyerhaeuser sawmill   is a major employer) and agriculture are also key employers, and emerging industries include bio-energy and tourism.

On a personal note, the town has hosted the DV 100 - an epic 100KM and 160KM bike race - which I have participated in a few times (the 100 that is).

Thanks for the warm hospitality Drayton Valley!