Ottawa Blinks in Trade Reset with U.S.

Plus, Fed Pressure, Risky Credit, Walmart Earnings

The Week in Review

Weekly Market Recap: U.S. and Canada

Sluggish, sluggish, sluggish. Then everything changed Friday after Fed Chair Jerome Powell’s speech in Jackson Hole. His comments opened the door to a potential rate cut, and investors wasted no time. All of the major indices spiked and held most of the gains through to the end of the trading period.

By the end of the week, the Dow Jones led with a 1.56% gain, just ahead of the TSX, which added 1.55%. The S&P 500 ended slightly higher, up 0.26%. The Nasdaq 100 was the clear outlier, dropping 0.92%. Powell’s remarks gave the market a jolt, but not enough to pull tech back into the green.

Week ending August 22, 2025

Major Economic Stories

Recap of the Week

This week’s economic narrative was centered on cooling inflation and strength in housing activity in both Canada and the U.S.

Here’s a closer look as the details.

Canada Inflation Slows Again

Canada’s annual inflation eased again in July, dropping below both expectations and the Bank of Canada’s 2% target.

Lower gasoline prices drove most of the slowdown, helped by the scrapping of the carbon levy. Core inflation pressures like food and shelter crept higher though, and that’s a tell-tale sign that inflation may not stay muted for long. BoC's preferred core inflation remained stuck at 3%.

  • CPI fell to 1.7%, down from 1.9% in June

  • Gasoline prices plunged 16.1% year-over-year

  • Food inflation climbed to 3.3% up from 2.9%

  • Core inflation (trimmed mean) held steady at 3%

Canada Housing Starts Up in July
National housing starts blew past expectations, coming in at 3.7%, largely thanks to a Montréal building boom.

Multi-unit construction in major cities led the way, with Montréal seeing a massive 212% jump. Toronto lagged sharply, but strong numbers in Vancouver and rural areas balanced things off. Interesting that we’re seeing the building sector remain active even in the face of rate pressures.

  • Total starts reached 294,085 units in July

  • Montréal starts surged 212%

  • Toronto starts dropped 69%

  • Rural starts estimated at 20,467 units

U.S. Housing Starts Jump

We saw a big boost in U.S. residential construction in July, 5.2%, led by multi-unit projects

The monthly rise added to strong June numbers, and surprised forecasters who expected a pullback. Regional trends showed sharp gains in the Midwest and South, offsetting declines in the West and Northeast.

  • Total starts hit 1.428 million annualized

  • Multi-unit starts up 11.6%

  • Midwest starts surged 33.3%

  • South starts rose 19.2%

Key Takeaways

Inflation: Cooling Headline, Sticky Core

Canada’s inflation was down again in July, which is nice, but the improvement is a bit surface-level and masks a more complicated reality. Gas prices, which have been in freefall, are clearly doing the heavy lifting, thanks in part to April’s carbon tax repeal. When we look at this number on paper, a 1.7% inflation rate might lull us into believing the Bank of Canada has this figured out, but once you strip out that gas number, we’re still looking at a 2.5% rise in prices.

Even more telling than the headline rate is core inflation, specifically the Bank’s trimmed-mean metric, which is stuck at 3%. That’s been unchanged for three months now, and it’s a subtle but important sign that persistent pressures in shelter and groceries are masking the bigger inflation story. I think the optimism over these headline numbers might be a bit premature, and unless the core starts moving down as well, rate cuts are going to be a tough call.

The Inflation-Rate Disconnect is a Problem for the BoC

I’m sticking with inflation for insight number two, because I think it’s so important.

As you just read, markets have grabbed onto the softer inflation headline and are already banking on the idea of more rate cuts. But here’s the problem: the Bank of Canada doesn’t set policy simply based on what markets hope inflation means, it’s looking at where underlying pressures are still stuck. And that’s where the disconnect comes in.

From a market perspective, 1.7% inflation says, “we’re all good,” but from the Bank’s perspective, core inflation isn’t moving, and that makes cutting rates a risky move, especially if new cuts restart the debt cycle. The longer this gap between perception and policy reality stays open, the harder it gets to manage expectations.

Housing Strength Disregards Rate Pressures

A bit of a surprise perhaps is that even though we’re still seeing a lot of continuing affordability challenges, residential construction in both Canada and the U.S. was surprisingly strong in the latest report. Here at home, housing starts were up nearly 4%, led by a 212% spike in Montréal that is, quite frankly, stunning. The crux of the story is that supply is rising fastest in cities where multi-unit developments can be approved and built quickly, while places like Toronto, where approvals take longer and costs are higher, are falling behind.

We’re seeing a similar picture in the U.S. Multi-unit housing is driving growth, but single-family homes are seeing slower growth. It’s clear that developers are anticipating sustained rental demand, especially in regions like the Midwest and South where construction jumped. What this really points to is underlying structural demand. If inflation remains in check and interest rates start to come down, this momentum in housing could turn into a full-blown rebound.

THIS WEEK’S POLL QUESTION
(Results in Next Week’s Newsletter)

Canada dropped some of its retaliatory tariffs on U.S. goods this week in an effort to restart trade talks. The move is being called strategic by some and a concession by others. I’m asking whether you feel P.M. Carney made the correct decision as he and his economic advisor work through the trade negotiations.

Do you think Canada was right to remove some retaliatory tariffs?

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LAST WEEK’S POLL RESULTS

In last week’s poll, I asked where you stood in the dispute between Air Canada and the union representing flight attendants. The response was clear. 71 percent of you sided with CUPE, while only 29 percent supported Air Canada.

As always, please vote on this week’s poll question and leave your comments.

Reader Comments

CUPE

"Having read the unions side & company side I do not know which is accurate. All I will say is everyone should be paid for work they do for their employer. If you are required to clock in for work, that is the point when you should be paid. Ask yourself, if your employer advised that you had to clock into your job at 8am but you would not be paid till 12 noon what would your response be? My question is do the pilots have the same work rules and if not Why? Also, when Air Canada says that their flight attendants are the highest paid in Canada - what does that mean? There are not a lot of Canadian based airlines so not so many flight attendants. It will be very interesting what arbitration comes up with.” — entender1012

 “No one should work for free. A flight attendant needs to be trained for emergencies, deal with unreasonable customers, ensure safety AND are waiters/waitresses. No tips! They should be given danger pay and be paid for all hours they work. The business model is broken somewhere if that isn't possible. Perhaps the top dogs need to take a pay cut to compensate” — syoungconsultinginc

 “Pay your employees for the extra hours they put in.” — eccodog

 “People should be paid for all the hours they are required to be at work.“ — kiminpr"

 Air Canada

“Never trust the union.” — strass1616

TRADE
Canada Drops Some Tariffs to Restart U.S. Trade Talks

  • Canada removes tariffs on select U.S. goods

  • Steel, auto, and aluminum tariffs still in place

  • Carney and Trump speak for first time in months

  • Trade talks are back on — but still uncertain

Are we seeing a Canadian-style TACO trade decision? It was reported Friday that Canada is easing off a bit on its trade fight with the United States. Prime Minister Mark Carney said Canada will drop some retaliatory tariffs on American goods to try and reboot stalled trade talks. It’s a small gesture, but one meant to clear the path for bigger negotiations in sectors that actually matter, including steel, autos, aluminum, and lumber.

Phone call resets the tone

This shift came shoftly after Carney and Trump spoke for the first time in months, and the first time since Trump’s August 1 deadline passed without a deal. Sticking with his beloved hockey metaphors, Carney said he wants to focus on getting the puck in the net instead of just playing defense. Basically, they are trying to move things forward without giving up leverage.

Optimism, but no guarantees

Trump called the move nice and said he likes Carney. Spoiler alert; that is subject to change. Trump’s current affection for our PM doesn’t mean much policy-wise, but it might give some hop that the tone is warming up. The two sides have started talking again, with an eye on key trade areas like copper and lumber. No deal yet, but at least the conversations are back on, and that’s a good thing.

Read More Here

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THE FEDERAL RESERVE BOARD
Powell Opens the Door to Rate Cuts

  • Powell signals current rates may be holding back growth

  • Markets now fully pricing in a September rate cut

  • Labor market risks rising, despite low unemployment

  • Fed caught between mixed data and political heat

A huge piece of news jolted the markets Friday. Jerome Powell’s Jackson Hole speech gave markets exactly what they were hoping for: a signal that a rate cut might be coming soon. He didn’t say it outright, but he came pretty close. Powell pointed to rising risks in the labor market and suggested that current interest rates could be holding things back more than expected.

Markets didn’t miss the message

As you saw in the Weekly Chart above, stocks took off right after Powell spoke. His comment that downside risks to employment are rising caught a lot of attention, and investors are now fully pricing in a rate cut in September, with another possibly by year-end. Powell also touched on tariffs and inflation, and noted that the price impacts are now clearly visible, but the outlook remains murky.

Caught between pressure and mixed signals

The Fed is in a tricky spot. Trump has been pushing hard for lower rates, but Powell also has to consider sticky core inflation and a job market that’s cooling, but not collapsing. As we’ve seen in the deliberations, internally, the Fed is split. Some members are saying it is time to cut and others urging continued caution. Powell’s comments feel like he’s still on the fence, even if he might be leaning one way. The door is open, but nothing is locked in.

Read More Here

THE ECONOMY
Walmart Lifts Forecast as Shoppers Chase Deals

  • Full-year sales forecast raised to 4.75% growth

  • Grocery discounts helped drive 4.6% U.S. sales boost

  • Online sales up 25%, with faster store-to-door delivery

  • Tariff costs rising, but customers keep spending

Walmart is winning where others are struggling. The retail giant raised its full-year sales and earnings outlook after another strong quarter, saying that its low-price playbook is working in this inflation-sensitive environment. Shoppers from all income levels are leaning into grocery rollbacks and value buys, pushing revenue to $177.4 billion for the quarter, ahead of analyst forecasts.

Strong sales, especially in essentials

U.S. same-store sales rose 4.6%, thanks to strong demand for basics like fresh food, household staples, and over-the-counter meds. Walmart pointed to more than 7,400 “rollbacks,” and said grocery markdowns were up 30%. People are spending more per trip, even if they’re shopping less often — the average basket size jumped 3.1%, while visits grew just 1.5%.

E-commerce shines, tariffs bite

Another bright spot came with online sales, climbing 25%, with one-third of deliveries hitting customers in three hours or less. But it’s not all smooth sailing and Walmart says its still dealing with rising costs tied to tariffs. CFO John Rainey said they’ve had to absorb some of those costs but pass others along, and the pressure isn’t going away. Still, the company raised its full-year growth outlook and expects U.S. demand to hold steady heading into fall.

Read the full story here.

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CONSUMER CREDIT
Lenders Give Risky Borrowers More Credit Room

  • Monoline card limits are up 20% since mid-2023

  • Bank-issued cards increased limits by 12%

  • Delinquency rates remain high in subprime segment

  • Payment-to-balance ratios are slipping

In the ongoing saga of debt concerns here in Canada, lenders are still opening up credit, even for borrowers who are starting to show signs of financial strain. A new report from FICO shows that credit limits are rising across the board, but the biggest jumps are happening with monoline credit cards. These are cards issued by companies that only offer credit cards and often serve younger or riskier customers. Their average limits are up 20 percent year over year, even as repayment behavior has started to weaken.

A tale of two card types

Bank-issued cards saw more modest growth, around 12 percent, but monolines are clearly being more aggressive, with delinquency rates still above 6 percent, roughly double the rate for traditional bank cards. FICO says lenders may be feeling pressure to stay competitive and are offering more credit to keep customers from leaving, while trying not to let balances get out of hand.

More credit, but not more spending (yet)

Utilization rates, which measure how much of that credit people are actually using, have stayed mostly flat, and that might look like good news. It could mean borrowers are using the extra room as a cushion rather than to spend more. But at the same time payment-to-balance ratios are falling, which shows people are paying back less of what they owe. If that trend keeps going, and rates stay high, we could be looking at more trouble ahead.

Read the full Story Here

OTHER NEWS FROM THE PAST WEEK

Carney Reflects on First 100 Days
Prime Minister Mark Carney used his first 100-day milestone to highlight progress on trade, housing, and climate, but critics say his government has been more talk than action so far.

Delta Lets SkyMiles Members Vote on Summer Perks
Delta is handing the mic to its SkyMiles members and employees, letting them vote on which summer perks and rewards should be introduced next, part of a broader strategy to boost loyalty.

FTC Sues LA Fitness Over Cancellation Policy
The Federal Trade Commission is suing LA Fitness, accusing the gym chain of making it nearly impossible for members to cancel and continuing to charge fees after cancellation requests.

Cenovus to Acquire MEG Energy
Cenovus Energy is acquiring MEG Energy in a major oilsands deal worth $11 billion, aiming to consolidate production and cut costs as the energy sector faces pressure to scale efficiently.

CRA Cuts Hundreds of Call Centre Jobs
The Canada Revenue Agency is slashing more than 600 call centre jobs, saying demand for phone support has dropped, but critics warn this could worsen service delays during tax season.

Trump Extends TikTok Deadline in China Standoff
Trump has extended the deadline for TikTok to divest from its Chinese parent company, giving ByteDance more time as negotiations continue and legal challenges unfold in U.S. courts.

Market Movers

Top 10 Weekly Gainers

TSX, NYSE & Nasdaq Exchanges | Market Cap >$10B | Week ending August 22, 2025

Top 10 Weekly Losers

TSX, NYSE & Nasdaq Exchanges | Market Cap >$10B | Week ending August 22, 2025

10 Most Overbought Stocks

Week ending August 22, 2025 | Most Overbought Stocks, based on 14-Day RSI

10 Most Oversold Stocks

Week ending August 22, 2025 | Most Oversold Stocks, based on 14-Day RSI

The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold.
📈A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell.
📉A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

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