What’s Going on in the Canadian Economy Right Now?
June offered a mixed picture of Canada’s economic landscape. While growth showed some resilience earlier in the year, momentum is now slowing under the weight of inflation, trade uncertainty, and a cooling labour market.
On June 4, the Bank of Canada held its key policy rate at 2.75%, citing mixed signals in both inflation and economic growth. Inflation, though moderated by the removal of the federal carbon tax, remains a concern. Core inflation, excluding volatile items like food and energy, remains above 3%, suggesting consistent price pressures on essential goods and services (Bank of Canada, 2025a).
While economic growth exceeded expectations in the first quarter of 2025, but the Bank of Canada forecasts a slowdown as early export gains from businesses front-loading shipments fade. Labour markets have softened, especially in sectors sensitive to trade disruptions like manufacturing. The Canadian unemployment rate has climbed to 6.9% back in April. During the June 17 Bank of Canada deliberations, Bank officials emphasized ongoing caution, citing the need to balance cooling domestic demand with rising costs from trade disruptions (Bank of Canada, 2025b).
One emerging economic trend is Canadians are staying within Canada. According to Statistics Canada, same-day return trips by automobile to the United States were down over 40% year-over-year in May, marking five straight months of declines (Statistics Canada, 2025). Overnight travel also fell by more than a third.
While some of this shift reflects rising travel costs and weaker consumer confidence, it also suggests how quickly consumer behaviour adjusts to economic and political uncertainty. This decrease in discretionary spending reflects a broader trend of caution in household finances.
Before the latest round of tariff threats, Canada’s economy was gaining traction. During late 2024 and early 2025, household spending, business investment, and exports all contributed to stronger-than-expected GDP growth. Final domestic demand rose at its fastest pace in over three years, and employment climbed by over 210,000 jobs between November and January (Gellatly & McCormack, 2025). Household finances were improving too, borrowing costs eased, incomes increased, and debt service ratios dropped to their lowest levels in nearly two years, but this momentum faces challenges.
Canada still faces structural economic challenges, especially in productivity and trade dependence. Labour productivity growth in Canada has consistently lagged the United States, and business investment per capita remains below pre-pandemic levels. Poor productivity can limit wage growth and increase exposure to cost-of-living pressures. It also makes it harder for businesses to cover the costs of restructured supply chains or shifting trade policies.
Trade with the U.S. is a major key to the Canadian economy, as nearly 17% of Canada’s GDP depends on exports to the United States, and many Canadian industries source over 15% of their inputs from U.S. suppliers (Gellatly & McCormack, 2025). When U.S. policy shifts, the ripple effects across Canadian households and businesses are immediate and widespread.
What This Means for Your Financial Plan
While you can’t control economic headlines, you can control your financial decisions. With rising uncertainty around rates, trade, and inflation, it’s more important than ever to stay focused on what matters most, your personal goals and day-to-day habits.
With summer here and the kids out of school, it’s a great time to bring the family into the conversation. Whether it’s setting a small savings goal for a shared experience, talking about needs versus wants, or exploring the basics of investing together, summer can be a natural and meaningful opportunity for financial education at home.
By staying focused on your goals and using this season to build financial awareness across the household, you’re setting the stage for smarter decisions all year long.
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
Bank of Canada. (2025a, June 4). Bank of Canada holds policy rate at 23/4%. https://www.bankofcanada.ca/2025/06/fad-press-release-2025-06-04/
Bank of Canada. (2025b, June 17). Summary of Governing Council deliberations: Fixed announcement date of June 4, 2025. https://www.bankofcanada.ca/2025/06/summary-governing-council-deliberations-fixed-announcement-date-of-june-4-2025/
Gellatly, G., & McCormack, C. (2025, May 28). Recent developments in the Canadian economy: Spring 2025. Statistics Canada. https://www150.statcan.gc.ca/n1/pub/36-28-0001/2025005/article/00005-eng.htm
Statistics Canada. (2025, June 25). Economic and Social Reports, June 2025. https://www150.statcan.gc.ca/n1/daily-quotidien/250625/dq250625a-eng.htm
