Weekly Digest – 28 March 2025
Bank of Canada Weighed Holding Off on Rate Cuts This Month Due to Trade Uncertainty
The Bank of Canada cut its key interest rate to 2.75% on March 12, marking the seventh consecutive cut. The decision was closely debated, with some members preferring to wait for more clarity on U.S. tariffs, while others felt the economic uncertainty justified action. The bank is trying to balance the risks of a slowdown with the threat of rising inflation caused by tariffs and a weaker loonie. Although inflation has hovered near 2%, early signs suggest price pressures may increase due to supply disruptions. The central bank is now taking a risk-management approach, being less forward-looking and more reactive as conditions evolve. Governor Tiff Macklem emphasized flexibility amid unpredictable U.S. trade policy. While another rate cut is possible, future easing is expected to be limited, as policymakers remain cautious about stoking inflation during uncertain times.
Consumer Spending Resilient Despite Low Confidence, But Faces Potential Downward Pressure: RBC Economists
RBC economists report that Canadian consumer confidence dropped 32% between January and March amid escalating trade tensions with the U.S. Despite resilient spending early in the year, looming tariffs and the end of the GST/HST holiday are now dampening consumer activity. Retail spending dipped in February, with RBC card data showing a 0.2% drop (excluding autos), aligning with Statistics Canada’s 0.4% decline. Discretionary goods purchases fell, while spending on essentials and services held steady. Restaurant sales remained stable, supported by strong OpenTable bookings. Regionally, the sharpest declines were in the Prairies and Atlantic provinces due to slower population growth. Ontario outperformed, boosted by $200 stimulus cheques. With new U.S. tariffs expected on April 2, economists warn that uncertainty may further suppress consumer spending in the coming months, despite some signs of short-term resilience in select sectors.
Canadian Payroll Employment and Average Weekly Earnings Rise in January 2025
Canada’s labour market showed continued strength in January 2025, with payroll employment rising by 26,800 positions (+0.1%), following December’s gain. Year-over-year, employment was up by 198,900 jobs (+1.1%), according to Statistics Canada. Average weekly earnings for non-farm payroll employees reached $1,294.26, reflecting a 5.5% increase from January 2024. Wage growth was particularly strong in finance and insurance (+12.4% to $1,792), wholesale trade (+8.7% to $1,570), and professional, scientific, and technical services (+7.5% to $1,863). These figures point to a positive trend in both job creation and wage growth, signaling resilience in Canada’s labour market despite ongoing economic headwinds. The data supports a cautiously optimistic outlook for the economy as 2025 progresses, with solid income gains potentially supporting consumer spending even amid broader trade uncertainty and inflationary pressures.
Toronto’s New Home Sales Plunge to Record Low in February, Leaving Nearly 17,000 Units Unsold
February marked the worst month on record for new home sales in the Greater Toronto Area, with nearly 17,000 new and pre-construction condo units sitting unsold, according to a report by Altus Group for the Building Industry and Land Development Association. The data highlights a stagnant market, as potential buyers remain hesitant due to persistently high prices. The benchmark price for a condo apartment remains around $1 million—slightly down from 2024 but nearly unchanged since January. Despite declining sales activity, pricing has not adjusted enough to attract buyers, reflecting ongoing affordability challenges in the GTA housing market.
Companies Revamp Product Labels to Appeal to Canadian Shoppers
Amid rising trade tensions with the U.S., Canadian consumers are increasingly seeking domestically made products, prompting companies to update packaging to emphasize Canadian roots. Crosby Foods, a 145-year-old New Brunswick company, is moving its “Proudly Canadian” label to the front of its molasses products, despite being ineligible for official “Made in Canada” claims due to imported sugarcane. Other companies like Nature’s Path, Kruger Products, and Maple Leaf Foods are enhancing Canadian labeling or launching patriotic campaigns, such as the “Look for the Leaf” initiative. Grocers are also adding shelf signage to help consumers identify local products. The Canadian Food Inspection Agency has seen a rise in complaints over misleading origin labels. Industry experts say the surge in “buy Canadian” sentiment is more than temporary, and supporting both Canadian-owned and Canadian-made products is key to protecting domestic jobs and industries.