Other economic indicators

The picture have shifted slightly

The U.S. economy ended 2025 on a notably softer note than initially reported. According to the BEA, real GDP grew at just 0.7% annualized in Q4 2025 — well below the robust 4.4% expansion in Q3 — dragged down primarily by the longest government shutdown in US history, which alone subtracted 1.0 percentage point from growth considering the 17% plunge in federal outlays.  

For the full year, real GDP grew 2.1% in 2025, a solid result.

On the productivity front, the picture is more nuanced than earlier data suggested whileunit labor costs reversed course sharply. Unit labour cost surged 4.4% in Q4 2025 - driven by a 6.3% jump in hourly compensation against that backdrop of tepid productivity gains.  

Since the start of 2026, the U.S. labour market has been stable on the surface, but lacking genuine momentum. The three-month average for 2026 sits at just 68,000 jobs per month, and year-over-year job growth stands at a mere 0.2%.  The unemployment rate edged down to 4.3% in March, but largely due to a contraction in the labour force rather than genuine job creation.

Crude oil prices are not coming down anytime soon

The crude oil market has been turned upside down since late February 2026. On February 28, U.S.-Israeli strikes on Iran triggered the blocking of the Strait of Hormuz — a chokepoint through which approximately 20% of the world's oil supply transits daily.   Within two weeks, the price of crude surged 40%, from around US$65 per barrel at end of February to nearly US$95, before briefly exceeding US$100 and peaking at over US$119 in early March — the highest level since 2022.

OPEC output collapsed by 27.5% in March — a loss of nearly 7.9 million barrels per day as Gulf producers were unable to export through the blocked strait. On April 5, the eight core OPEC+ members met virtually and decided to implement a further production adjustment of 206,000 barrels per day effective May 2026, while reaffirming flexibility to pause or reverse their phase-out of voluntary cuts depending on market conditions.  OPEC also slashed its Q2 2026 global demand forecast by 500,000 barrels per day to 105.07 million bpd — though it kept its full-year 2026 demand growth forecast intact at 1.38 million bpd, anchored by Chinese and Indian demand.

Crude oil market conditions remain shaky, but there is no global shortage of oil today. Brent and WTI will remain high, but many observers are still calling for the barrel to remain below the 100$ US mark for most of the year. The outlook, however, hinges almost entirely on the duration of the conflict and the pace of resumption of flows through the Strait of Hormuz.

The loonie caught in a tug-of-war — energy up, dollar down

The Canadian dollar's trajectory in 2026 has defied historical logic. The loonie peaked at US$0.74 at the end of January — its highest level since mid-2025 — before reversing course sharply. By early April, it had fallen below US$0.72, hitting a 2026 low, even as energy prices were surging.

WTI climbed from US$65–70 in February to above US$100 by end of March — a rise of more than 40% — yet the loonie failed to benefit. Historically, Canada's status as a major energy exporter would have supported the currency in such circumstances. The Canadian dollar is now behaving more like a cyclical currency than a commodity currency. Looking ahead, the loonie is unlikely to recover significantly. A sustained rebound would require either a resolution of the Middle East conflict, a narrowing of the Canada-U.S. rate differential, or a meaningful improvement in Canadian growth prospects — none of which appear imminent. 

The Bank of Canada will remain on hold despite new risk to inflation

The Bank of Canada has now held its policy rate at 2.25% for three consecutive meeting and is likely heading toward its fourth at the upcoming April 29 decision.

On one hand, Canada's economy contracted 0.6% annualized in Q4 2025, and roughly 95,000 jobs were lost in the first three months of 2026. The economy appears to still be running below potential and under capacity. On the other hand, headline inflation — which had eased to 1.8% in February — is expected to spike in coming months as energy prices surged 57% at the pump following the Middle East conflict and the base effect from the carbon-tax axed dissipate starting April. Core inflation stood at 2.3% in February, with upside risks now in play, the Bank of Canada have some leeway to maintain its stance even with higher inflation readings.

The policy rate has declined by a cumulative 275 basis points since the latest peak of this cycle in June 2024. Effective rates for households have fallen by 153 basis points since then, while those for businesses have declined by only about 200 basis points. Effective rates recently increased on the back of higher risk premium for debt.

The market appears to be hit by new rate headwind

Activity remains steady in the residential resale market, as the number of recorded transactions remained flat in March compared to February but 2.3% lower than in 2025. Transaction volumes has been subdued for four consecutive months, pointing to a slow market ahead of spring season. There was a slight increase in the weighted average home price, but this remained modest as the MLS Home Price Index continued to decline.

The mortgage renewal wave remains the key vulnerability — and Canada's banking regulator is now sounding the alarm. Now, higher market rates from the Middle East war is adding fresh stress to an already stretched renewal cycle. As of January 2026, 3.1 million mortgages — or 52% of all outstanding — are due to renew by end of 2027, including 1.3 million fixed- and fixed-payment variable-rate mortgages renewing for the first time since rates were at pandemic-era lows.

SME confidence is already on a wild ride this year

The year opened on a cautiously optimistic note. January's CFIB Business Barometer held steady near its historical average (~60), with many SMEs expressing measured optimism for 2026. February brought a genuine surge — the 12-month index jumped to 64.8.Then March erased nearly all those gains. The Middle East conflict sent the 12-month index plunging 9.5 points to 55.8 — back to fall 2025 levels.

Economic conditions such a low demand are a growing concern among business owners as well as input cost surged.