The Weekly Bottom Line
Our summary of recent economic events and what to expect in the weeks ahead.
Date Published: July 10, 2026
- Category:
- Canada
Canadian Highlights
- Canada’s economy added 18k jobs in June, while the unemployment rate edged down to a five-month low of 6.5%.
- Canada’s merchandise trade surplus widened in May, strengthening the case for a rebound in second quarter growth.
- Business and consumer sentiment remained subdued, amid an uptick in household inflation expectations. Still, it’s unlikely to alter the BoC’s outlook, with rates expected to remain at 2.25% at next week’s announcement.
U.S. Highlights
- Markets looked through a week of geopolitical whiplash, with AI and chip optimism helping keep U.S. equities close to record highs.
- The ISM Services Index eased only modestly in June, with activity and orders still expanding and employment returning to growth.
- Existing home sales disappointed as affordability remained binding, while the FOMC minutes underscored a Fed that is divided but still inflation-focused.
Summer time, and the living is easy– or at least that’s the impression from this week’s economic data. Trade surprised to the upside, while another month of job gains, albeit modest, suggest the economy remains in a low gear, but has shaken off recession concerns. Markets largely took the releases in stride, with attention squarely focused on developments in energy markets. The collapse of the fragile Middle East ceasefire pushed crude oil prices higher on the week. The S&P TSX ended the week flat, while the loonie appreciated by roughly one cent against the U.S. dollar.
Canada’s economy added 18k jobs in June, with hiring concentrated in the private sector, led by accommodation and food services. The unemployment rate edged down to 6.5%, returning to where it began the year (Chart 1). Looking through the month-to-month volatility, the broader picture remains encouraging: employment is up year-on-year, with hiring concentrated in full-time, private sector positions while the unemployment rate has eased a touch faster than anticipated in our June forecast. Another welcome development is the improvement in youth labour market conditions with the youth unemployment rate falling to 12.7%, down from a peak of 14.6% last September. Statistics Canada also noted that the student summer job market appears more favourable than a year ago.
Trade provided further evidence that the economy is moving in the right direction. Canada’s merchandise trade surplus widened to $4.2 billion in May, extending the improvement seen in recent months (Chart 2). The increase was driven primarily by stronger exports to the U.S., while exports to non-U.S. destinations continued to ease. Imports edged lower, partially reversing April’s increase. Taken together with April’s GDP report, the latest trade data strengthen the case that economic growth will rebound in the second quarter following softer prints in each of the prior two quarters.
That said, the trade picture remains far from settled. Monthly trade flows continue to be heavily influenced by volatile sectors, suggesting that the contribution from net exports is likely to remain uneven over the remainder of the year. More importantly, elevated trade policy uncertainty continues to weigh on business and household confidence. That caution was evident in the Bank of Canada’s latest Business Outlook Survey and Canadian Survey of Consumer Expectations. Business sentiment remained subdued in the second quarter, amid softer hiring intentions and continued reports of weak demand. Consumers also remained cautious, while their inflation expectations edged modestly higher. One caveat is that surveys were conducted during the recent energy-price spike and therefore likely overstate the persistence of underlying inflation pressures.
Taken together, this week’s releases remain consistent with our broader outlook. An improvement in trade alongside a labour market that continues to generate jobs suggest that the economy is hanging in there despite elevated uncertainty. With little evidence that higher oil prices are spilling over to broader inflation, we expect the Bank of Canada to keep rates unchanged at 2.25% at next week’s policy meeting.
The week began with investors juggling another round of geopolitical whiplash. The NATO summit delivered shifting headlines on the U.S.-Iran conflict, including renewed doubts over the durability of the ceasefire and subsequent reports of technical talks. Oil prices moved with each headline, but the broader equity market held up well. The S&P 500 remained near its early-June record and is up roughly 10% this year, while the Nasdaq was buoyed by renewed enthusiasm around AI-linked chip demand (Chart 1). In short, markets are still willing to look through geopolitical uncertainty so long as energy prices stay contained and the tech earnings story remains intact.
The week’s data offered some support for that resilience narrative. The ISM Services Index slipped to 54.0 in June from 54.5 in May but remained comfortably in expansionary territory for the 24th consecutive month. The details were mixed, but not alarming. Business activity and new orders cooled, while the employment index moved back above 50 for the first time in four months. Price pressures also eased, with the prices-paid index falling to 67.7 from 71.3, though that still leaves service-sector inflation running hot (Chart 2). The takeaway is that demand is moderating, but the services economy is not rolling over.
Housing sent a less encouraging signal. Existing home sales fell 2.4% in June to a 4.09 million annualized pace, missing expectations, while the median resale price rose to a record $440,600. Inventory remains too thin to generate meaningful price relief, and elevated mortgage rates continue to keep both buyers and sellers on the sidelines. Meanwhile, the FOMC minutes showed a Committee still wrestling with the inflation outlook. Officials appeared split between scenarios where lower energy prices and fading tariff effects allow inflation to cool, and scenarios where persistent price pressures driven by AI-related investment demand require tighter policy. New York Fed President John Williams later argued that the minutes effectively captured the Committee’s ‘collective reaction function,’ emphasizing that policymakers are weighing a range of inflation scenarios rather than signaling a predetermined rate path.
Taken together, the week’s data point to an economy that is cooling at the margin, but still posting moderate growth. Services activity remains expansionary and hiring has stabilized, while housing remains constrained by affordability rather than excess weakness in demand. The FOMC minutes confirm that the Fed is not on a preset course, but they also do not offer much comfort to markets looking for imminent easing, or even an anchor for their expectations. The bar for another hike likely depends on whether inflation proves broader and more persistent. That makes next week critical: CPI will test whether price pressures are easing, while Chair Warsh’s testimony to Congress should clarify how the Fed is weighing inflation risks against a still-resilient growth backdrop.
Disclaimer
This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.
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