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The Weekly Bottom Line 

Our summary of recent economic events and what to expect in the weeks ahead.

Date Published: June 20, 2025

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Canadian Highlights

  • The main takeaway for Canada from this week’s G7 meeting was the pledge to work towards a new trade deal with the U.S. within 30 days.
  • Economic data showed resilience in housing markets and household spending. However, steeply slowing population growth will be a headwind moving forward.
  • Next week’s inflation report is expected to show some easing in core inflation, and a sub-2% headline print. However, June’s all-items inflation will be juiced by a surge in oil prices. 

U.S. Highlights

  • The Federal Reserve left interest rates unchanged for the fourth consecutive time this year, as members revised their expectations for 2025 inflation higher relative to March.
  • U.S. retail sales in May contracted notably as tariff front-loading purchases ended, although the broader composition of sales appeared to remain healthy overall.
  • Senate Republicans continued to race against the clock on their self-imposed July 4th deadline to pass the President’s multi-trillion-dollar One Big Beautiful Bill Act.

Canada – Geopolitical and Data Events Dominate Busy Week

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Chart 1 shows WTI oil prices from May 1st to June 19th, 2025, expressed in USD. In June 19th, oil was at x, up from USD$ 62.52/barrel on June 2nd and an average of $60.9/barrel in May.

This week offered a robust set of geopolitical events and data for investors to digest. Chief on the agenda was the G7 meeting in Alberta. There were a few takeaways for Canada, including a commitment of $4 billion in funding for Ukraine and steps to enhance trade with the U.K. However, the principal outcome was the agreement with the U.S. to work towards a new trade deal within 30 days. Also on the trade front, Prime Minister Carney announced that Canada will limit steel imports from countries that don’t have a free trade agreement with Canada to 2024 levels (which represents 35-40% of steel brought in from other countries). He also indicated that Canada will adjust its tariffs on U.S. steel and aluminum products on July 21st depending on how trade talks with the U.S. administration are progressing.

With some optimism, Bank of Canada (BoC) Governor Macklem flagged the potential for a new Canada-U.S. trade deal in a speech this week. He also noted this week’s release of the BoC’s Summary of Deliberations. The Summary detailed the logic behind policymakers’ decision to hold their policy rate steady at 2.75% on June 4th. Three particularly significant reasons held sway. First, uncertainty remained very high (suggesting the need for greater clarity before making any moves). Second, the economy was showing some resilience. Finally, inflation remained relatively firm. Policymakers remain concerned about the opposing impacts on inflation from tariffs and a weakening economy. For our part, we see the economy slipping into a technical recession this year, paving the way for additional easing (as detailed in our updated Quarterly Economic Forecast). 

Chart 2 shows the year-on-year % growth in Canada's population, from the beginning of 2019Q1 to the beginning of 2025Q2. In the beginning of 2025Q2, population growth was 1.2%, down from 1.8% in 2025Q1 and 3.2% in the beginning of 2024Q2. The sample maximum is 3.2%, hit in the beginning of 2024Q2. The sample minimum is 0.3%, hit in the beginning of 2021Q1. The sample average is 1.8%.

Next week will bring the release of inflation data for May, and consensus sees a similar print to April’s 1.7% rate for the all-items measure. June could be a different story, however, given the surge in oil prices amid conflict in the Middle East (Chart 1). Since the end of May, WTI prices have shot up by about 20%. The consensus expectation is also for a dip in the BoC’s preferred core inflation measures after their heated April showing. 

We’ve seen very little in the way of home price inflation in Canada’s housing market recently. However, conditions appear to be turning around. Both Canadian home sales and average home prices advanced in May, and we think activity will be stronger in the second half, driven by pent-up demand. Homebuilding also had a solid May. Households are also showing some resilience, with this morning’s report showing that retail trade volumes advanced 0.5% m/m in April. However, some downside for Canadian domestic demand could manifest moving forward, given the sharp slowdown we’re seeing in population growth. Indeed, data this week revealed a significant easing in population growth during the first quarter (Chart 2). This cooling is expected to persist and while tariff fallout has stolen all the headlines, slower population gains remain a factor underpinning our forecast for subpar economic growth in the coming quarters.

Rishi Sondhi, Economist | 416-983-8806

U.S. – Economic Policy in Wait-and-See Mode

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Chart 1 shows the month-on-month percentage change in U.S. retail sales and U.S. retail sales excluding autos, building supplies, & gasoline for March, April, and May 2025. Total retail sales recorded a very strong gain in March, before flattening in April and contracting materially in May. Excluding autos, building supplies, & gasoline, retail sales recorded stable growth in March, a flat reading in April, and stable growth in May as well.

The last week of spring came with no shortage of headlines on the policy front, but it appears monetary, fiscal and trade policy remain in wait-and-see mode for now. The week began with President Trump leaving the G7 leaders’ summit early to monitor rising tensions in the Middle East, which have continued to push oil prices higher. On the home front, a handful of economic data releases and a Federal Reserve interest rate decision were on deck. Meanwhile, Congressional Republicans continued to work on their sizeable tax cut and spending bill. As of the time of writing, equity and Treasury markets were roughly unchanged on the week.

Checking in on the health of the U.S. consumer, we saw U.S. retail sales fall materially in May, largely owing to a pull-back in categories that had seen front-loaded sales in advance of tariffs in months prior (i.e. autos, electronics, appliances, etc.). Excluding the more volatile categories, retail sales saw a healthy gain in May (Chart 1), likely continuing to be aided by a stable job market and solid real income growth. However, moving forward we expect both trends to ease as tariffs apply upward pressure to inflation that builds moving into the second half of the year (see here).

Chart 2 shows the FOMC median projection for real GDP growth, the unemployment rate, and core PCE inflation in 2025 for their March and June updates. Relative to March, the FOMC revised their growth expectations for 2025 lower (1.4% vs. 1.7%), inflation expectations higher (3.1% vs. 2.8%), and unemployment rate higher (4.5% vs. 4.4%). Note that real GDP growth and inflation are in fourth-quarter-over-fourth-quarter growth terms, while unemployment rate projections are year-end based.

The Federal Reserve emphasized a similar expectation during their decision on Wednesday, with the FOMC’s median projections showing subdued economic growth for 2025, in addition to higher unemployment and inflation (Chart 2). The latter is what in part motivated the Fed to keep interest rates unchanged for a fourth time this year in June, with Chair Powell noting that the Fed was well positioned to wait to see how the economy evolved moving forward. Although tariffs are likely to only be a transitory shock to inflation, loosening monetary policy too quickly in this environment could add to upward pressure on prices – a risk the Fed is determined to avoid. For this reason, monetary policy easing is expected to be gradual through the second half of the year, with markets expecting the first cut of the year in September and only 50bps of cuts cumulatively.

Elsewhere in Washington D.C. this week, Senate Republicans continued to table their versions of sections of the multi-trillion dollar ‘One, Big, Beautiful Bill Act’ (OBBBA), including the Senate Finance Committee, which oversees tax policy and Medicaid. On the surface, the Senate Finance Committee’s markup of the bill broadly includes less generous household tax cuts, more generous business tax cuts, and more stringent cuts to Medicaid compared to the House version. Given the OBBBA only passed the House by a margin of one vote in late May, passing a consolidated, bicameral bill is likely to be a challenging process, especially as Congress only has one week left in-session before their self-imposed July 4th deadline.

Looking ahead to next week, the OBBBA’s progression through Congress will continue to be closely monitored. We will also get an update on personal income & spending for May, which will include the Fed’s preferred inflation metric, core PCE. Possible trade deals remain a topic of interest, with the suspension of reciprocal tariffs scheduled to expire in less than three weeks. 

Andrew Foran, Economist | 416-350-8927

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