Uncertainty about US President Donald Trump’s trade policy is curbing Canadian business investment and consumer spending, though firms see the economy avoiding a bad recession, central bank surveys show.
Canadians say they’re ramping up their boycott of US travel and products in response to US President Donald Trump’s tariffs, and the country’s central bank is taking notice.
“I won’t be going to the US anytime soon,” one respondent told the bank. “I don’t feel good about spending my money there.”
Canadian retail sales grew at the fastest pace this year in June, according to an official estimate, bouncing back from a slowdown in May.
*June sales likely +1.6% m/m
*May sales -1.1% and April +0.4%
*2Q sales estimate +0.4% q/q, the weakest quarterly pace in a year
Canadian consumer prices accelerated for the first time in four months and underlying price pressures were firmer, likely keeping the central bank from cutting interest rates on July 30.
*CPI +1.9% y/y in June, up from 1.7% in May
*The index +0.1% m/m last month
*Core rates +3.05%, up from 3%
The Canadian economy shrugged off tariff uncertainty, adding the most jobs in six months with the unemployment rate falling for the first time since January.
*Employment +83,100 in June
*Jobless rate fell 0.1 pp to 6.9%
*Part-time work made up 84% of job gains
*Private +47,000; public +23,000
It seems that nothing Canada has tried so far has shielded it from the threats of Donald Trump.
Love this quote from @karl-schamotta.bsky.social: “There was hope that there was light at the end of the tunnel — unfortunately it appears that light is a train.”
Canadians are committed to ditching US travel, taking the fewest number of car trips there in the year’s first half since at least 2017, excluding the pandemic.
*Canadians returned from 8m trips in 1H, vs. 11m in 2024
*Canadian return trips by car from the US -33% y/y in June
*And by air -22% y/y
A growing number of migrants in the US are heading north, even as Canada adopts increasingly restrictive immigration policies of its own.
*Saint-Bernard-de-Lacolle crossing saw asylum claims jumped by more than 400% y/y, first six days of July
*Claims +128% in June; +82% so far this year
Canada should become a world leader in producing and processing raw materials for military equipment and defense systems, according to the Business Council of Canada.
The Canadian economy is on track for a modest decline this quarter, yet isn’t deteriorating as fast as some economists feared.
*April GDP -0.1% m/m
*May GDP also -0.1% m/m
*Assuming no growth in June, 2Q likely -0.3% q/q annualized, vs economist estimates of -0.5% and BOC forecast of 0% to -1.3%
Youth unemployment in Canada jumped 3.6 pp over the past two years, the sharpest increase among the 25 largest OECD economies — including the US, UK and Australia.
As of May, one in seven Canadian youth can’t find work, and they’re more than twice as likely as other age groups to be unemployed.
Canadian consumer prices held steady while core measures eased slightly, likely giving some relief to Bank of Canada policymakers who had raised concerns about hotter underlying inflation prints in recent months.
*CPI rose 1.7% y/y in May, matching April's pace
*Core +3%, down from 3.1% in April
Tighter immigration rules have cut off the fuel from the Canadian population growth engine.
*Canada added just 20,107 people in 1Q
*That's 0% quarterly population growth vs. 1Q average of 0.3% over the past decade
*It's the slowest quarterly rate since records began in 1946, tied with 4Q of 2014
Bank of Canada officials said it would be tough to cut the policy interest rate further if core inflation remains firm, but acknowledged more easing may be needed if the economy continues to weaken.
By 2030, Bloomberg Economics forecasts, if Trump’s current tariff regime endures, the global economy will be $1 trillion smaller than it would have been had the US remained in the Trans-Pacific Partnership.
Cross-border road trips to the US from Canada fell for a fifth straight month in May.
*Canadian-resident return trips by automobile from the US -38.1% y/y
*Canadians’ return trips by air from US -24.2%, versus +9.8% from other countries
*US car trips to Canada -8.4%
Canada’s trade-driven sectors are showing clearer signs of a pullback in activity brought on by US President Donald Trump’s tariffs.
*Manufacturing sales fell 2.8% in April, the largest monthly drop since October 2023 and the lowest level since early 2022
*Wholesale sales dropped 2.3%
The Canadian economy eked out minor job gains, and the unemployment rate rose for a third straight month to the highest level since September 2016 outside of the pandemic.
*Employment grew by 8,800 positions in May
*Jobless rate rose 0.1 ppt to 7%
*Number of unemployed people +13.8% y/y
Businesses believing that the worst-case tariff scenarios were less likely to become reality helped convince Bank of Canada policymakers to stay on the sidelines this month.
Canadian exports plunged by the most in nearly 17 years outside of the pandemic, widening the country’s merchandise trade deficit to the largest on record.
*Canada's trade deficit reached C$7.1 billion in April
*Total exports fell 10.8%; imports were down 3.5%
*Exports to the US plunged 15.7%
Economists are abandoning their calls for monetary-policy easing in Canada next week as traders price in only a small chance of an interest-rate cut and the nation’s output beat all estimates.
BMO and RBC now expect no changes in rates next week, contrary to the cut they saw before.
A strong jump in tariff-driven exports fueled Canada’s growth at the start of this year, offsetting domestic weakness in other parts of the economy.
*1Q GDP +2.2% annualized, up from 2.1% in 4Q
*Monthly GDP +0.1% in March and likely +0.1% in April
*Traders pared expectations for a June 4 rate cut
The economic gains of Prime Minister Mark Carney’s defense spending boost will likely be worth more than double the planned investment costs, according to Canadian Imperial Bank of Commerce economists.
Great view of King Charles and Queen Camilla from our Bloomberg Ottawa office during their visit to Canada
Canadians have returned from 1.35 million fewer road trips to the US over the past two months than they did a year ago, eschewing crossing the border that US President Donald Trump called “artificial” and wanted removed.
Canadians are growing more optimistic about the economy, as the conclusion of a national election relieves some anxiety around the country’s direction and US President Donald Trump’s threats, according to the Bloomberg Nanos Canadian Confidence Index.
Canada’s tepid pace of job creation last month sent the unemployment rate soaring back to a level last seen in November, the highest since January 2017 outside of the pandemic.
*Employment grew by just 7,400 positions in April
*Jobless rate +0.2 percentage points to 6.9%
