The Weekly Bottom Line
Our summary of recent economic events and what to expect in the weeks ahead.
Date Published: November 21, 2025
- Category:
- Canada
Canadian Highlights
- Canada’s economy is showing signs of slowing momentum, but inflation persists.
- Upcoming GDP figures have an additional layer of uncertainty due to delayed trade data.
- Tepid growth and slowly softening underlying inflation are in line with the Bank of Canada’s projections, suggesting no upcoming changes to the policy rate.
U.S. Highlights
- Equity markets sold off this week as investors continued to worry about the valuations of AI companies.
- Although the data fog has started to clear, it did little to resolve differences among FOMC members, with a rate cut in December now looking less likely.
- The delayed September payrolls report was better than expected, rising by 119,000 jobs. However, the unemployment rate increased to a new cyclical high of 4.4%.
An absolute data dump of a week, with updates on housing, inflation and retail sales. The overall story was one of waning economic momentum, and some disappointingly stubborn underlying inflation. That is basically in line with the Bank of Canada’s (BoC) and our expectations – tepid growth and gradually weakening price pressures. With trade policy still prone to large changes, things could swing rapidly, but the new information this week suggests the BoC will remain on the sidelines for the time being.
The Canadian housing market continues to trudge along, with monthly starts dipping 3% on a six-month moving average basis. The figure isn’t all that surprising given that new housing construction has been running at a healthy clip well ahead of anything registered before the pandemic (Chart 1). This has been supported by healthy activity in the multifamily space, with purpose-built rental construction offsetting the drag from the owner-occupied segment. Nonetheless, with building permits trending downward the sector’s contribution to growth is likely to fade.
Fading momentum was the story in September’s retail sales figures as well, with sales tumbling 0.8% in real terms on the month, essentially reversing August’s gains. This leaves real retail sales up only 1.2% versus a year ago. October’s flash estimate is for no growth – although with goods CPI falling last month there is hope for some small gains in volume terms. Nonetheless, real retail spending contracting in the third quarter and trending below 2% for the year are not the hallmarks of robust consumer activity.
Domestic activity data suggest that some of the healthy momentum in late-2024 and the second quarter of this year has begun to fade amid an elevated unemployment rate. This is consistent with our view that inflation should remain contained in the coming months as domestic excess supply helps to offset inflationary pressure from global trade disruptions. And there are inflationary pressures to be offset. Measures of core inflation remain close to 3% on an annual basis, and near-term trends have also flipped higher, with three-month rates of change above 2.5% for the four most-prominent indicators (Chart 2).
This sets the stage for next week’s third quarter GDP report. Our expectation is that growth will register somewhere between 0.5% and 1.0% on a quarterly (annualized) basis. This forecast, however, has an additional layer of uncertainty embedded in it as the U.S. government shut down delayed the release of Canadian trade data. Given the swings in trade in the second quarter, this forms a vital input into the projection – so its absence is adding uncertainty. We await clarity on when the information will be released and whether Statistics Canada’s estimates of third quarter GDP will incorporate the information or rely on their own estimates of the figure.
All told, signs point to slow growth for Canada in Q3, with some stubbornness in inflation. All in line with what the BoC outlines in their most recent projection and suggesting that change in policy is not in the offing.
Equity markets sold off this week amid concerns about high tech-stock valuations and aggressive AI capital spending. As of writing, the tech-focused Nasdaq Composite was down 2.5% on the week, while the S&P 500 had declined 1.9%.
Official economic data began to trickle in, with September’s payroll report being the most notable. However, reporting backlogs are expected to persist. October payrolls will be released with November’s figures on December 16, not in time for the FOMC’s next meeting on December 9–10. Other data points, like October CPI, will not be released. On the housing side, existing home sales edged higher in October, supported by falling mortgage rates. Still, the housing market continues to tread water as affordability remains stretched, despite some modest improvement in recent months (Chart 1).
A busy slate of Fed speakers reaffirmed the lack of consensus among FOMC members for another rate cut in December. Some, like Governor Jefferson (voter), advocated for a cautious, “meeting-by-meeting approach,” as the policy rate moves closer to neutral. Chicago Fed President Goolsbee (voter) joined the hawkish camp, downplaying the recent labour-market weakness and emphasizing the lack of progress on inflation.
Minutes from the October FOMC meeting also highlighted the growing divide, with many participants seeing no case for easing in December. This contributed to market pricing shifting towards the next cut coming in January rather than December. After that meeting, Chair Powell stated that a December cut “is not a foregone conclusion, far from it.”
But policy doves like Governor Waller (voter), argued that another rate cut in December is warranted, given his assessment that the labor market remains weak, longer-term inflation expectations are anchored, and the impact of tariffs on inflation are likely to be transitory. Echoing this view, FOMC Vice Chair Williams emphasized that inflation expectations remain “very well anchored” and noted room for further cuts over the ‘near-term’. These remarks helped to tip market odds back in favour of a December cut on Friday morning.
The delayed September payrolls report did little to reconcile the divide among policymakers. Hawks were likely reassured by the better-than-expected job gains: payrolls rose by 119k—the strongest reading since April (Chart 2). However, policy doves are likely to point to the negative revisions to prior months, the narrow concentration of job gains, and the uptick in the unemployment rate.
All in all, hawkish voters appear to outnumber the doves on the FOMC for now, and there is no official jobs or inflation data before the next meeting to shift views. Therefore, we expect the slow-and-steady approach to carry the day and for the Fed to hold rates steady in December. Chair Powell perhaps said it best: “when you’re driving in the fog, you slowdown”. That said, the door for a cut in January remains open.
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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