What’s Going on in the Canadian Economy Right Now?
As we enter Q2 2025, both Canada and the global economy are navigating a period of uncertainty. Inflation has creeped up, GDP growth is slowing, and global trade tensions are high with the United States tariffs making economic conditions more volatile. At the same time, financial markets and consumer confidence are adjusting to the evolving outlook.
Inflation in Canada rose to 2.3% in March, with core inflation measures (CPI-trim and CPI-median) holding near 2.8%–2.9%. Prices for goods have increased due to a weaker Canadian dollar, tariff-related supply costs, and price adjustments by suppliers. Shelter inflation has begun to ease, but inflation expectations are rising (Bank of Canada, 2025a).
Canada’s GDP rose by 2.6% in late 2024 but slowed to an estimated 1.8% in Q1 2025. Residential investment and consumer spending have softened, while unemployment has moved up to 6.7%, reflecting hiring slowdowns in export-exposed industries (Bank of Canada, 2025a).
Globally, uncertainty is just as high. The U.S. has imposed widespread tariffs, increasing its average rate from 2% to a potential 22%, the highest in over a century (Bank of Canada, 2025c). In response, countries including Canada and China have introduced countermeasures, which has dampened global growth expectations and added pressure to commodity markets, business investment, and consumer sentiment (Bank of Canada, 2025b).
Looking ahead, the Canadian federal election scheduled for April 28 may also influence the economic landscape. Economic topics such as inflation, affordability, and trade are shaping campaign narratives. While the long-term policy direction will depend on the outcome, elections often introduce short-term uncertainty that can affect business and consumer confidence.
The bottom line is that while the term inflation targets of 2% remains intact, near-term conditions will likely remain unpredictable. Trade policy, currency volatility, and inflation pressures are all in flux. In this environment, staying flexible and working from a well-aligned financial plan is more important than ever.
What This Means for Your Financial Plan
In times of economic uncertainty, staying grounded in a well-thought-out plan is more important than ever. While the headlines may shift weekly, smart planning helps protect your long-term goals and reduce emotional decision-making.
Here are key actions to consider:
1. Review Your Strategy with a Financial Advisor
Now is a smart time to reconnect with your financial advisor to ensure your portfolio still aligns with your goals, risk tolerance, and time horizon.
- A thoughtful review can help identify whether your current asset allocation is resilient enough to handle today’s market volatility.
- Your advisor can help assess whether it's time to rebalance your investments, shift toward more defensive positions, or take advantage of opportunities in undervalued sectors.
- Discuss how your long-term plan accommodates changing economic conditions, like inflation, interest rate fluctuations, or potential recession.
Rather than making reactive decisions, working with a professional helps you make informed, proactive adjustments tailored to your unique financial goals.
2. Focus on What You Can Control
While you can’t control trade policy or interest rates, you cancontrol how you save, spend, and invest, these daily decisions have the biggest impact on your long-term financial success.
- Maximize RRSP and TFSA contributions for 2025 early in the year to take advantage of tax-deferred or tax-free growth.
- Revisit your emergency fund to ensure it's well funded in case of job market softness.
3. Plan for Inflation
Inflation isn’t likely to disappear entirely. Even if it stabilizes, your financial strategy should anticipate rising costs over time.
- Review your retirement income plan and ensure it includes inflation-protected sources.
- If you're already retired, consider staggering withdrawals and reviewing your drawdown strategy.
4. Think Strategically About Taxes
With the RRSP deadline behind us, now is a good time to plan ahead:
- Track your capital gains and income across accounts to reduce next year’s tax burden.
- If you're earning a variable income or nearing a life milestone (e.g., home purchase, retirement), work with a financial advisor to forecast tax impacts.
5. Stay Informed, But Stay Focused
Market headlines will continue to shift with each new policy announcement. The key is to stay informed without becoming reactive.
- Consider setting regular financial check-ins every quarter instead of reacting week-to-week.
- Focus on your long-term objectives, not the noise.
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, April 16). Outlook - Monetary Policy Report—April 2025—Canadian economy. https://www.bankofcanada.ca/publications/mpr/mpr-2025-04-16/canadian-outlook/
Bank of Canada. (2025b, April 16). Global Economy - Monetary Policy Report—April 2025—Canadian economy. https://www.bankofcanada.ca/publications/mpr/mpr-2025-04-16/global-economy/
Bank of Canada. (2025c, April 16). Current Conditions - Monetary Policy Report—April 2025—Canadian economy. https://www.bankofcanada.ca/publications/mpr/mpr-2025-04-16/canadian-conditions/
