What’s Going on in the Canadian Economy Right Now?
Despite economic headwinds both at home and abroad, August brought a mixture of encouraging signals and persistent uncertainty for the Canadian economy. While inflation metrics cooled and the Bank of Canada (BoC) inched closer to a potential rate cut, concerns around employment, trade, and geopolitical tensions kept the outlook cautious.
Short-term core inflation in Canada slowed notably in July, with CPI-Median and CPI-Trim easing to 2.4% on a three-month annualized basis, the slowest pace in nearly a year (TD Economics, 2025). This development supports the narrative that domestic economic slack is helping to offset cost pressures from tariffs and global supply chain adjustments. Markets responded with modest optimism, and rate cut expectations for the BoC's September 17th meeting rose slightly. However, markets still place only a 33% chance on a cut, leaving investors in a holding pattern.
The Canadian labour market showed weakness in July, shedding over 40,000 jobs and pushing the employment rate to an eight-month low (Reuters, 2025). Although the unemployment rate held steady at 6.9%, youth employment was particularly hard-hit, with the 15–24 age group seeing their lowest job rate (53.6%) since 1998, excluding pandemic years. While June’s employment gains were strong, this pullback highlights the uneven path ahead as consumer sentiment and job growth fluctuate.
Despite the job losses, other areas of the Canadian economy showed resilience. Housing starts rose by 3.7% month-over-month in July, well above the post-GFC average, fuelled by rental demand and government housing initiatives. Retail sales volumes also surprised on the upside, increasing by 1.5% month-over-month in June (TD Economics, 2025). These signals suggest Canadian households remain active, even as economic momentum cools.
A striking divergence continues between financial markets and economic fundamentals. The S&P 500 recently closed at record highs, driven largely by enthusiasm around AI and tech stocks, especially Nvidia (Randewich, 2025). Meanwhile, Canadian investors are grappling with a more modest growth environment and ongoing trade disruptions. This split underscores the importance of separating portfolio performance from broader economic well-being.
Beyond inflation and interest rates, geopolitical risks remain a top concern. A recent KPMG report underscores the impact of tariffs, energy market volatility, and global decoupling on key sectors. While Canada is not immune to these trends, it may find opportunities in minerals, nuclear, and clean energy. Still, any escalation in global trade tensions or supply chain disruption could weigh on business confidence and investment here at home (KPMG, 2025).
What This Means for Your Financial Plan
As summer winds down and routines begin to shift, now is the perfect moment to regroup, financially and mentally. The markets may be reacting to inflation trends, rate speculation, or global headlines, but your personal economy still runs on the decisions you make day to day.
Before the leaves start to change colour, give yourself a financial check-up. Did you overspend on summer vacation? Are your fall expenses planned out? Is your emergency fund where you want it?
Although it seems small, a financial check-up is needed because sometimes, the best financial move is simply hitting “refresh.”
Whether you're a current client or someone looking to take the next step toward financial success, Alpen Investment Advisors is here to guide you every step of the way. Based in North Vancouver, our team, led by Jon Alpen, brings over 18 years of experience in helping clients grow, preserve, and navigate their wealth. With expert guidance, tailored solutions, and a steadfast commitment to your success, we are dedicated to supporting your unique financial journey.
Reach out to us today at jonathan@alpenia.ca to start or continue building your financial future with confidence and clarity.
References
Randewich, N. (2025, August 27). S&P 500 notches record close; traders turn to Nvidia results. Reuters. https://www.reuters.com/business/sp-500-notches-record-close-traders-turn-nvidia-results-2025-08-27/
Reuters. (2025, August 9). Canada's economy shed over 40,000 jobs in July, partly offsetting earlier growth. CBC News. https://www.cbc.ca/news/business/canada-labour-force-survey-july-1.7604068
TD Economics. (2025, August 23). Weekly Bottom Line: Canadian Highlights. https://economics.td.com/ca-weekly-bottom-line
KPMG. (2025, August 24). Top Geopolitical Risks 2025: Energy Insights. https://kpmg.com/xx/en/our-insights/risk-and-regulation/top-risks-forecast/energy.html
