The Weekly Bottom Line
Our summary of recent economic events and what to expect in the weeks ahead.
Date Published: April 10, 2026
- Category:
- Canada
Canadian Highlights
- Canada’s economy saw only modest job gains in March, which kept the unemployment rate flat at 6.7%. Though that was enough to meet markets’ low expectations.
- Higher energy prices pushed card spending at gas stations higher in March, while weighing on spending elsewhere and contributing to slowing momentum.
- Weaker spending, while challenging for the economy, may prove to be an ally, helping to contain second-round effects from this cost-push shock and allowing the Bank to remain on hold.
U.S. Highlights
- The U.S. and Iran agreed to a two-week ceasefire, leading to a sharp drop in oil prices and rally in U.S. equities.
- Headline CPI inflation rose to a nearly two-year high in March, reflecting a surge in gasoline prices.
- Consumer spending remained soft in February, though weather related effects likely had some impact.
A Slavic proverb says, “bad peace is better than a good quarrel.” Markets seem to agree. A promise of a ceasefire – however flimsy – helped drive oil prices 12% lower, removing a portion of the global risk premium and helping the S&P/TSX regain some footing, with the index up 2% on the week. The bond market was equally skeptical. Yields moved lower initially, only to reverse course and finish the week just two basis points lower. The loonie recovered some recent losses, rising 1%, as the greenback gave up part of its safe haven bid.
March’s labour market report came in as expected, with employment little changed. A small gain provides some relief after two months of losses, but the three-month trend remains in negative territory, underscoring ongoing softness in the labour market (Chart 1).
The details were relatively constructive. There was little variation between public and private sector employment. On a sectoral basis, gains were driven by other services and natural resources, while losses were concentrated in finance, insurance, real estate, rental and leasing. The labour force participation rate and the unemployment rates were unchanged at 64.9% and 6.7%, respectively. Wage growth accelerated on a year-on-year basis, though partly due to compositional shifts. On a constant-composition basis, wages rose at a pace similar to the last two months. All in, the report continues to point to a lackluster labour market under strain amid multiple economic headwinds.
Those headwinds are now intensifying. The sharp increase in global energy prices has fed through to gasoline prices, with March retail prices rising 23% month-on-month and 8.4% year-on-year (Chart 2). The energy shock is hitting the consumer from a weak starting point with higher prices now layering on top of existing cost-of-living pressures that have been weighing on growth and pushing it below potential.
The result is a consumer running on empty, with spending already losing momentum prior to the shock. This dynamic is evident in March’s TD Spend data. On a seasonally adjusted monthly basis, spending slowed to 0.2% from 0.6%, which given the increase in nominal gas prices on the month, would be even weaker measured in real terms.
The composition is telling. The largest contribution came from gas stations, with nominal spending up 8% on the month and 4.5% on the year (Chart 2). Absent the surge in gasoline spending, both goods and overall card outlays would have declined. Spending at supermarkets declined, suggesting households are tightening budgets to offset higher fuel costs. Notably, services – the key support in recent quarters – were flat, with pullbacks in both travel and recreation.
For policymakers, this creates a familiar dilemma. Were it not for the energy shock, the Bank of Canada would likely be discussing rate cuts. Instead, it is likely to remain on hold, looking through the near-term rise in headline inflation and focusing on core pressures and inflation expectations. In that sense, Canada’s relative economic weakness may prove to be an ally, helping to contain second-round effects from this cost-push shock.
The ongoing conflict in the Middle East remained the focal point for investors this week, despite a heavy economic data calendar, which included more early reads of March data and minutes from the Fed’s last meeting. Financial markets exhaled a major sigh of relief following the U.S. and Iran agreeing to a two-week ceasefire. Oil prices fell by more than $18 per barrel on the news – its sharpest one-day decline in six-years – with WTI and Brent both sitting just below $100 per barrel. Meanwhile, U.S. equities rallied on Wednesday and have held the gains through Friday, with the S&P 500 looking to end the week up 3.8% – its best weekly showing since May 2025. That said, the situation remains incredibly tenuous, as major issues regarding Iran’s nuclear program and their control over the Strait of Hormuz remain unresolved.
The March CPI inflation report provided the first glimpse of the effects that the energy shock is having on American households. Headline inflation grew at its fastest monthly rate since June 2022, pushing the year-ago measure to a near two-year high of 3.3% (Chart 1). Unsurprisingly, most of the upward pressure came from a spike in gasoline prices, which rose 21% month/month. But after removing the effects of food and energy, there was little evidence to suggest that higher energy prices are bleeding into the core measure. That isn’t surprising, as it’ll likely take a few months for these effects to show up. What is working to keep core inflation elevated is continued passthrough from last year’s tariff increases as well as sticky services prices. The secondary effects from the energy shock will only compound these lingering price pressures in the months ahead, likely leading to some upward drift on core measures of inflation.
This is already causing hesitation among some Fed officials on whether they should maintain a cutting bias. The minutes from the Federal Reserve’s March 17-18 meeting showed that a growing group of policymakers felt that interest rate hikes might be needed to counter inflation, particularly if the conflict were to drag on. The key word here being “might”. On balance, “many participants” still have rate cuts in their baseline forecast. The growing divergence suggests that any further move to lower rates isn’t likely to happen until there’s clear evidence that inflation is on a more sustainable path back to the Fed’s 2% target. This is unlikely to happen before September.
For the time being, the focus will remain squarely on the economic data. While backward looking, the February income and spending figures showed some softening in consumer spending to start the year (Chart 2). However, weather related effects were at least partially to blame for the slowdown. Importantly, March data have shown a rebound in activity, with non-farm payrolls more than reversing February’s pullback and vehicle sales reaching a six-month high. At the same time, roughly half of households have now filed their taxes, with the average refund totaling $3,521 – up $350 from last year. This should provide some near-term cushion to help offset the impact of higher energy costs.
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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