In this week’s The Seven… 

• Tariff talk - A lower tariff rate for Canada?
• Retail resilience - Spending up 
• Less taxing - Inflation in April
• Price shock - The cost of food
• Interesting Fact: Technically proficient
• Chart of the Week: Temporary population growth

Better but still worse

It was a short week with the Victoria Day holiday starting us off on Monday, but the tariff talk continued unabated, including comments made by the U.S. ambassador to Canada in an interview with CTV’s Vassy Kapelos. Ambassador Hoekstra had some good news and some bad news for Canada.

The bad news is that a base U.S. tariff on imported goods—including from Canada—appears to be table stakes going forward. If this is the case, U.S. tariffs are not just a negotiating tactic and a new trade agreement between the U.S. and Canada may look more like the recent deal struck with the U.K.—which includes a 10% blanket U.S. tariff—than the free trade we’ve enjoyed under the Canada-United-States-Mexico Agreement and its predecessors.

The good news? Canada could potentially strike a deal that gives us “the lowest tariffs of any country that America negotiates an agreement with.” That’s a rather low bar, but these days it counts as good news.

In the meantime, discussions between the U.S. and the European Union are not going particularly well with an early-morning social media post from Trump threatening to impose a 50% tariff on goods from the European Union starting on June 1.

Know thyself

The potential for higher tariffs to be a durable part of U.S. trade policy and the economic friction this will cause intensifies the need for Canada to address its domestic economic challenges. These include, but are not limited to, preparing for and harnessing the ongoing aging of the population, boosting productivity, getting ahead of technological change, and ensuring we have the infrastructure we need to succeed. Like so many other things, this is a group project that will require businesses, investors, workers, educators, community organizations and governments to work together. Doing so might just be one of the most effective responses we have to American protectionism.

Retail resilience - Consumers still spending

Despite the lowest consumer confidence reading on record, retail sales in Canada increased in March on the back of a surge in vehicle sales. Seasonally-adjusted spending was 0.8% higher than in February. In Alberta, monthly sales also improved by 0.8%.

The boost came as vehicle buyers sought to get ahead of potential tariffs with sales at motor vehicle and parts dealers 4.8% higher than in February. When we remove this category as well as notoriously volatile gas station sales, “core” retail spending edged up by 0.2%.

Statistics Canada’s advance estimate suggests retail sales increased 0.5% in April and the Conference Board’s Index of Consumer Confidence has made up some of the ground it lost, rising in both April and May.

Retail sales, moreover, remain higher than last year. Nationally, sales in the first quarter were 5.2% above the same quarter in 2024 and 7.5% higher in Alberta. This suggests that, tariff uncertainty and a weakening economy or not, consumers are yet to rein in their spending.

A stronger core - Underlying inflation trending up

As we reported on Tuesday, the removal of the consumer carbon tax on April 1 was the key reason the inflation rate dropped below the 2% target in April. The national Consumer Price Index grew by 1.7% in April on a year-over-year (y/y) basis compared to an average of 2.3% during the first quarter. In Alberta, the April reading was 1.7% versus an average of 2.6% over the first three months of the year.

While the slower rate of headline price growth was a relief for both households and central bankers worried about tariffs pushing inflation back up, there were some worrisome signs in terms of what might be around the corner. Two key measures of where inflation is headed (CPI-trim and CPI-median) were both higher in April compared to March and came in above the 3% mark.

Even with tariffs threatening to push prices higher, we continue to believe the Bank of Canada will be more concerned about the sputtering economy than inflation and cut its trendsetting policy interest rate three more times this year, taking it from its current level of 2.75% to 2%. It may, however, keep rates the same when it meets on June 4 as it waits for more data before the next regularly scheduled rate announcement on July 30.

Interesting Fact: Calgary and Edmonton on the global tech map

A new Global Tech Ecosystem Index prepared by Dealroom ranked tech ecosystems in 288 cities across 69 countries based on startup activity, investment, talent, and intellectual property. Eight Canadian ecosystems were included (Vancouver, Calgary, Edmonton, Toronto-Waterloo, Ottawa-Gatineau, Laval, Montreal, and Halifax).

Toronto-Waterloo ranked 11th overall with Calgary coming in at 78th and Edmonton at 170th. The Bay Area in the U.S. held the top spot in the world. Calgary had the fastest venture capital funding growth rate between 2020 and 2024 among the Canadian ecosystems at +239%, putting it 45th on the global list in this category.

While Calgary and Edmonton’s global rankings could be higher, given the intense competition for tech capital and tech talent, it is encouraging that they are on the list and, as our recent report on Alberta’s tech sector shows, well-positioned for future growth. As the chart below shows, the growth in the real GDP generated by Alberta’s tech sector has been outperforming Alberta’s overall growth.

Chart of the Week: Temporary growth - Alberta’s non-permanent resident population

They may only be here on a temporary visa, but non-permanent residents or NPRs (foreign workers, international students and asylum seekers*) are counted as part of Alberta’s total population. NPRs have been part of Alberta’s demographic story for a long time, but something very interesting has been happening lately. A few stats to ponder:

• On July 1, 2021, there were an estimated 79,453 non-permanent residents (NPRs) living in Alberta.
• By July 1, 2024, this had increased by 219% to 253,541.
• If the NPR population in Alberta had stayed the same over this period, Alberta’s total population would have grown by 6% instead of the 10% it actually grew by.
• Put another way, 38% of Alberta’s population growth over the 2021-2024 period was from NPRs.
• As of July 1, 2024, about 69% of NPRs had a work permit or a work and study permit, 19% had a study permit without a work permit, and 11% were a family member living with a permit holder or without a permit.

Particularly strong in Alberta, the growth in NPRs was part of a national trend that saw the number of NPRs in Canada rise by 1.7 million between 2021 and 2024 for an increase of 130%. The increase was driven by strong demand for temporary foreign workers in the wake of a spike in job vacancies during the pandemic, an increase in asylum claims, and increased international student enrolment.

Alarmed by the rapid rise in the NPR population, the federal government announced last year that it would seek to reduce the percentage of NPRs in the population through caps on new permits and other policy changes. While it remains to be seen if the federal government’s goal of bringing the percentage of NPRs down from over 7% to around 5% will succeed, there was a net loss of about 28,000 NPRs nationally over the last three months of 2024. As our Chart of the Week below shows, it was a different story in Alberta, where 6,632 NPRs were added to the provincial population at the end of last year. The gain was, however, much lower than in previous quarters, suggesting federal policy may be having an effect.

*Statistics Canada defines the non-permanent resident (NPR) population as people from another country with a usual place of residence in Canada who fall into one of the following categories: 1) work and/or study permit holders, as well as the family members of those permit holders; and persons whose permits are in the process of being renewed; 2) asylum claimants, protected persons, and related groups.

Answer to the previous trivia question: Renowned AI researcher and Turing Award winner Richard S. Sutton was a featured speaker at the Upper Bound AI Conference in Edmonton this week.

Today’s trivia question: Did any of the four teams left in the NHL playoffs (Edmonton, Dallas, Carolina and Florida) finish first in their division this season?