The Twenty-Four
The Seven, November 28, 2025
The feeling is mutual
By Mark Parsons 28 November 2025 8 min read
In this week’s The Seven…
- Energy deal - A major agreement, now we wait for shovels
- Recession avoided - Canadian GDP surprises, but weakness under the hood
- Untangled - How tariffs impact prices
- Black Friday shopping? You’re not alone
- Interesting Fact: Data centre mania
- Chart of the Week: Canadian GDP - Decade in review
“We will make Canada an energy superpower, drive down our emissions and diversify our export markets. We want to build big things, and we’re building bigger and faster together.”
-Statement by PM Mark Carney, November 27, 2025
“This is Alberta’s moment of opportunity to take the first steps toward being a global energy superpower and show the nation that resource development and sustainability can coexist.”
-Statement by Premier Danielle Smith, November 27, 2025
Energy agreement - A breakthrough in Alberta-federal relations
It’s far from a done deal, but Alberta and the federal government moved one step further on a path towards a west coast pipeline and an oil sands carbon capture and storage (CCS) project in a Memorandum of Understanding (MOU) signed yesterday.
Our ATB Capital Markets energy desk has done a deeper dive, but the main takeaway is that, under certain conditions, the federal government will drop regulatory barriers - the oil and gas emissions cap, the tanker ban, and clean electricity regulation - so the energy sector can expand production.
A pipeline will be considered by the federal Major Projects Office if Pathways Alliance, a consortium of the major oil sands producers, invests in its proposed $16.5 billion CCS project and Alberta strengthens its industrial carbon price to $130/tonne and maintains a net zero by 2050 commitment.
The shared Alberta-Canada goal is to make Canada an energy superpower by improving market access for Canadian energy in a way that decarbonizes the barrels produced and creates opportunities for Indigenous communities.
All this is upside to our economic forecast, which assumes no additional pipelines beyond current plans. For now, we will keep it upside due to still-important hurdles to a pipeline. Critically, Indigenous economic partnerships will be key, as will providing enough regulatory certainty for a private sector proponent to come forward.
This announcement matters for the Canadian economy. Energy is, by far, Canada’s largest export - supplanting motor vehicles and parts from the top spot in the mid 2000s. About three-quarters of the energy exports are crude oil and bitumen. However, the vast majority (91% year-to-date) of exported crude oil flows to the U.S. That’s down from roughly 97% before TMX was operational, but U.S. concentration risk remains high. A new pipeline would provide a major boost to Canadian overseas energy exports, and improve the price received through better market access.
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The upside to our forecast comes not so much from the pipeline construction, but from the upstream investment needed to fill the pipeline. To cite one estimate, energy expert Peter Tertzakian suggests that over $100 billion in cumulative investment would be needed to fill 1.5 million barrels/day of new pipeline capacity. For context, investment in the oilsands has totalled nearly $380 billion cumulatively since 2000. Given the size of the industry, it would not take much change in our oil sands outlook to alter Alberta’s growth path.
For example, we estimate that a $1 billion increase in oil sands investment (relative to our base case) would add about 0.2% to real GDP and lift employment by about 10,000. This does not include the increase in subsequent oil sands production, which would bolster exports. More to come on this, as we explore potential impacts.
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Dodging a (technical) recession
The Canadian economy bounced back in the third quarter, growing at an annualized rate of 2.6%.
As such, a so-called ‘technical recession’, characterized by two straight quarters of negative growth, was avoided following a 1.8% contraction in the second quarter.
The good news? The Canadian economy has fared much better than feared when the trade war broke out early in the year, thanks in no small part to a lower effective tariff rate than other countries. It’s also better than almost anyone was expecting when they went to bed last night (with thoughts of GDP numbers swirling in their heads). We were closely aligned with the Bank of Canada’s October call for a much smaller 0.5% lift.
The not so good news? The uptick is largely one-time owing to plunging imports, particularly of metals (gold, silver, platinum). Recall that imports subtract from GDP, so a decline in this category provides a lift by improving the trade balance. This effect is not expected to persist. Further, government investments, particularly in weapon systems, also provided a jolt that’s also not expected to persist.
Other GDP categories did not fare as well:
- Exports remain depressed. Tariff-induced front-loading led to a surge in exports in Q1, then a massive drop in Q2. Exports stayed low in Q3, with higher crude oil shipments offset by fewer exports of metals.
- Consumer spending took a step back, falling 0.4%, on fewer new vehicle purchases - likely related to tariff-avoidance front-loading earlier in the year.
- Most importantly, business investment remains weak. It fell yet again, by 4.5% on an annualized basis. You can partly chalk this up to trade uncertainty following Trump tariffs, but weakness in business investment long pre-dates Trump 2.0. And it’s something the federal government says they’re working on, with ambitions to catalyze $1 trillion in private investment.
Looking at the longer-term trend, the economy is still stuck in a much lower gear thanks to the trade war. According to the Bank of Canada, the Canadian economy is on a permanently lower path due to the rewiring of global trade.
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Our three main takeaways from today’s report:
1) Putting aside some temporary oddities that flatter Canada’s performance, let’s call it what it is - a much better GDP result than expected. More broadly, the economy has far exceeded expectations from early in the trade war. We now see a weaker Q4 handoff as imports swing back (also the advance October reading is negative), but today’s reading is leading us to re-run our models and we’re now tracking just north of 1.5% for 2025.
2) This report should keep the Bank of Canada firmly seated on the sidelines, with a hold expected next month.
3) The long-term trend challenge for policymakers is unchanged: chronically low business investment is holding back the economy (see our Chart of the Week). The federal government’s budget has diagnosed the problem, and promised to turn this around. There’s no question that the MOU is part of that plan.
Statistical sidenote: Canada relies on the U.S. for its trade data, which makes sense as shipments clear U.S. customs. The problem is the 6-week U.S. government shutdown delayed important data releases, and Stats Can is having to impute data for September. They call the September export numbers “special.” This means we should expect larger than normal revisions in the future. Bottom line: take this Q3 report with a larger-than-normal grain of salt.
Are tariffs raising prices? Yes
The U.S. administration is using tariffs to onshore manufacturing jobs and raise revenues. But it comes with an annoying side effect - higher prices. U.S. inflation has proven sticky, holding at around 3%, and tariffs are partly to blame.
But how do you measure the effects? In a novel approach, three U.S. economists have tracked retail prices, comparing how much imported goods prices have changed relative to domestic prices affected by tariffs and domestic prices unaffected by tariffs. Comparing the different baskets of goods, they estimate that tariffs have added 0.7 percentage points to consumer price inflation as of September 2025.
You can track their latest result here.
Black Friday anyone?
Canada is a bit of a laggard when it comes to Black Friday shopping. Black Friday solidified its place as a major shopping event in the U.S. during the 1980s, then really took off in the 2000s.
It’s a much newer phenomenon in Canada, becoming popular around the early 2010s.
One theory is that the strength of the Canadian dollar between 2008 and 2013 was the catalyst. It made cross-border shopping extremely popular, with Canadians traveling south to take advantage of the massive U.S. Black Friday sales.
To compete and keep shoppers (and their money) in Canada, Canadian retailers began offering their own Black Friday promotions, starting around 2010.
Don’t believe this story? Check out our chart below, showing the surge in the percentage of retail sales taking place in November since the early 2010s.
It doesn’t appear that Canadians are suddenly more in the holiday giving spirit. Rather, they have just front-loaded their shopping - more in November and less in December. The second chart shows a corresponding drop in the percentage of sales in December.
As for this holiday season, the Retail Council of Canada expects average spending to remain stable relative to 2024, but with a sharper focus on bargain hunting and Black Friday deals. Their survey points to a big jump in Alberta, with the province leading in per capita holiday spending.
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Interesting Fact: Data Centres
Global investment in data centres is expected to exceed $US 580 billion in 2025 according to the International Energy Agency, exceeding the amount of investment in new oil supplies.
This has been game changing for the global economy, accounting for over half the economic growth in the U.S. in the first half of the year. With abundant natural gas providing baseload power and cold temperatures, Alberta could be a major player, as we previously discussed.
Chart of the Week: Canada GDP - Decade in review
Last week we argued that the federal government has diagnosed the right problem (weak investment and productivity), but now needs to work with provinces and territories to fix it. 2026 is the year of execution.
Our Chart of the Week shows economic growth in Canada has been fueled by the consumer and government (for the most part) over the past 10 years, enabled in part by high debt burdens and low interest rates.
Lagging way behind is investment. It’s exports too, but it’s hard to export more without investment in trade infrastructure and new production facilities.
The 10-year time frame in this chart doesn’t fully capture the investment story. Investment still remains well below the 2014 peak, prior to the sharp pullback in energy investment.
Now all eyes are on Canada’s ability to execute on big projects again. Doing so would lead to a much needed rotation to investment-led growth.
Answer to the previous trivia question: King Louis XIV loved sugared almonds. Montreal entrepreneur Agathe de Repentigny gained great favour with the monarch by sending him maple sugar. In 1701, she exported 30,000 pounds of it to France.
Today’s trivia question: When was the first Cyber Monday?
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