Housing Activity Fell in December, Rounding Out A Disappointing Year

Last weeks release of December housing data by the Canadian Real Estate Association (CREA) showed the market ended 2025 with declining sales and prices due to ongoing economic uncertainty.
The number of home sales recorded over Canadian MLS® Systems declined 2.7% m/m in December. On an annual basis, transactions totaled 470,314 units last year, a 1.9% decrease from 2024, despite a series of Bank of Canada rate cuts.

“There doesn’t appear to have been much rhyme or reason to the month-over-month decline in home sales in December, which was simply the result of coincident but seemingly unrelated slowdowns in Vancouver, Calgary, Edmonton, and Montreal,” said Shaun Cathcart, CREA’s Senior Economist. “For that reason, it would be prudent for market observers to resist the temptation to trace a line from the end of 2025 into 2026. Rather, we continue to expect sales to move higher again as we get closer to the spring, rejoining the upward trend that was observed throughout the spring, summer, and early fall of 2025.”

New Listings
New supply declined by 2% on a month -over-month basis in December, marking a fourth straight monthly drop. Combined with a slightly larger decrease in sales activity in December, the sales-to-new-listings ratio eased to 52.3% from 52.7% in November. This remains close to the long-term average national sales-to-new listings ratio of 54.9%. Readings roughly between 45% and 65% are generally consistent with balanced housing market conditions. There were 133,495 properties listed for sale on all Canadian MLS® Systems at the end of December 2025, up 7.4% from a year earlier but 9.9% below the long -term average for that time of year. Inventories have been falling since May 2025 owing to the mid -year rally in demand, meaning active listings could be back posting year-over-year declines around the time this year’s spring market gets going.
“While we remain in the quiet time of year for a little while longer, the spring market is now just around the corner, and it is expected to benefit from four years of pent -up demand, and interest rates that at this point are about as good as they are going to get,” said Valérie Paquin, CREA Chair. “Barring any further major uncertainty -causing events, that means we should see a more active market this year.”

There were 4.5 months of inventory on a national basis at the end of December 2025, up slightly from 4.4 months, which had been the measure since August. The long-term average for this measure of market balance is 5 months of inventory. Based on the measure of one standard deviation above and below that long -term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

Home Prices
The National Composite MLS ® Home Price Index (HPI) fell by 0.3% between November and December 2025. It was similar to the dip recorded in November and could reflect some sellers making price concessions to sell properties before the end of the year. Most of the overall price softening in December came from markets in Ontario’s Greater Golden Horseshoe region, which was hit hard by US tariffs. The non-seasonally adjusted National Composite MLS® HPI was down 4% from December 2024. Under the surface, year-over-year declines are larger for condo apartments and townhomes, and smaller for one- and two-storey detached homes.

Bottom Line
Last weeks data end a year that saw house prices drift lower despite falling interest rates, as a simmering trade war with Canada’s largest trading partner caused higher unemployment and considerable job uncertainty. Though US tariffs apply to a limited volume of Canadian goods, and the economy didn’t tip into a recession, the unpredictability of President Donald Trump’s trade policy has stoked a sense of economic insecurity.
In some regions, the price decline has now wiped out a sizable proportion of the gains homeowners saw during the torrid Covid market from 2020 to 2022, when overnight interest rates were reduced to a record-low 25 basis points. Back then, ultralow interest rates caused home prices to surge, particularly in smaller cities to which remote workers fled to take advantage of a lower cost of living.
Vancouver and Toronto remain by far the most expensive large cities. The benchmark price in Greater Vancouver was C$1.14 million in December. In the Toronto region, it was C$962,300 — down about 6% from a year earlier. With many regional markets soft, sellers are now pulling back. New listings dropped 2% in December from the previous month, the fourth straight monthly decline. But the total number of homes on the market last month was still 7.4% higher than the previous year. That’s the equivalent of about 4.5 months of inventory.
We concur with the view that there is considerable pent-up demand among potential first-time buyers who will likely dip their toe in the market once winter passes. This year, we also see a record volume of refinances and renewals, which will increase monthly mortgage payments and dampen household purchasing power.

Canadian Job Growth Slows Markedly in December as the Unemployment Rate Rises to 6.8%

Today’s Canadian Labour Force Survey for December was weaker than expected. Employment was little changed (+8200; 0.0%), and the employment rate held steady at 60.9%. This followed three consecutive monthly increases.

The jobless rate rose 0.3 percentage points to 6.8%, as more people searched for work. The increase in the unemployment rate in December partially offsets a cumulative decline of 0.6 percentage points in the previous two months. Employment rose among people aged 55 and older, while it fell among youth aged 15 to 24.

Full-time employment rose by 50,000 (+0.3%) in December, while part-time employment fell by 42,000 (-1.1%). The decline in part-time work in the month partially offsets a cumulative gain of 148,000 (+3.9%) in October and November. Over the 12 months to December 2025, part-time employment rose at a faster pace (+2.6%; +99,000) than full-time employment (+0.7%; +128,000).

In December, there was little change in the number of private- and public-sector employees, as well as in the number of self-employed workers.

There were 1.6 million people unemployed in December, an increase of 73,000 (+4.9%) from November.
The participation rate—the proportion of the population aged 15 and older who were employed or looking for work—rose by 0.3 percentage points to 65.4%. On a year-over-year basis, the labour force participation rate was unchanged in December. The unemployment rate for youth aged 15 to 24 rose 0.5 percentage points to 13.3% in December, as fewer youth were employed (-27,000; -1.0%). Labour market conditions had previously improved for youth in October and November, with employment rising by 70,000 (2.6%) and the youth unemployment rate falling by 1.9 percentage points over this period.

In 2025, Trump’s tariff policy and negative attitude towards Canada have caused considerable uncertainty, having a marked deleterious effect on the Canadian economic outlook, particularly in sectors dependent on US demand. Job vacancies also fell during 2025.

Bottom Line

The Bank of Canada has reiterated that its primary mandate is price stability, effectively leaving the task of closing the output gap to fiscal authorities. By early next year, it will likely become evident that fiscal support delivered through large capital projects is rolling out too slowly to offset near-term weakness in activity materially. If layoffs persist at their recent pace and the United States were to withdraw from the Canada‑US‑Mexico Agreement, the case for an additional round of monetary easing would strengthen.

Absent that downside scenario, the more plausible path is a slow and limited normalization of policy. Market pricing currently anticipates that the next move by the Bank of Canada will be to raise the overnight policy rate, but that is not likely until at least late this year.

Good News on the Inflation Front Will Keep the BoC on the Sidelines

The Consumer Price Index (CPI) held steady at 2.2% year over year in November, as core inflation continued to ease. Accelerating costs for food and some other goods were offset by slowing price growth for services.

In November, prices for services rose 2.8% year over year, compared with a 3.2% increase in October. Prices for travel tours declined 8.2% last month following a 2.6% increase in October. Monthly, these prices fell 12.0%, as lower demand for destinations in the United States put downward pressure on the index.

Prices for traveller accommodation fell to a greater extent on a year-over-year basis in November (-6.9%) than in October (-0.6%). The most significant contributor to the lower prices was Ontario (-20.2%), partially due to a base-year effect from a swift monthly increase in November 2024 (+11.0%), which coincided with a series of high-profile concerts in Toronto.

Lower prices for travel tours and traveller accommodation, in addition to slower growth for rent prices, put downward pressure on the all-items CPI.

Offsetting the slower growth in services on an annual basis were higher prices for goods, driven by increases in grocery prices and a smaller decline in gasoline prices. Excluding gasoline, the CPI rose 2.6% for the third consecutive month.

The CPI rose 0.1% month over month in November. On a seasonally adjusted monthly basis, the CPI increased 0.2%.

Grocery Price Inflation Highest Since the end of 2023

Prices for food purchased from stores rose 4.7% year over year in November after increasing 3.4% in October. The increase in November was the largest since December 2023 (+4.7%). The main contributors to the acceleration in November 2025 were fresh fruit (+4.4%), led by higher prices for berries, and other food preparations (+6.6%).

In November, prices for fresh or frozen beef (+17.7%) and coffee (+27.8%) remained significant contributors to overall grocery inflation on an annual basis. Higher beef prices have been driven, in part, by lower cattle inventories in North America. Adverse weather conditions in growing regions have affected coffee prices, which have risen amid American tariffs on coffee-producing countries, contributing to higher prices for refined coffee.

On a monthly basis, grocery prices rose 1.9% in November, the largest month-over-month increase since January 2023.

Acting as a bit of a counterweight, shelter costs—the earlier inflation villain—continue to moderate. Owned accommodation expenses are now up just 1.7% y/y, the slowest pace in almost a decade amid sagging home prices. Rent inflation remains sticky, but did tick down to 4.7% y/y last month. Keep an eye on electricity prices, which have been a major issue in the US, where AI data centers consume large amounts of electricity. The cost of electricity jumped 1.5% in the month and is now up 3.4% y/y. Telephone services have also leapt recently, after falling heavily the past two years; they are now up 11.7% y/y, the fastest increase since 1982.

The good news is that inflation will average just over 2% for all of 2025, down from 2.4% last year and the lowest annual tally in five years. The less-good news is that this moderation was mainly due to the removal of the consumer carbon tax, which alone shaved about half a point off the annual average.

The main core inflation measures decelerated in November, with the BoC’s two measures both easing two ticks to 2.8% y/y (and both up just 0.1% m/m in seasonally adjusted terms). And, ex food & energy prices also rose just 0.1% m/m, cutting the annual rate three ticks to a moderate 2.4% y/y pace.

Bottom Line

This report confirms the Bank’s hold on the policy rate. Aside from food prices, inflation seems to be dissipating. The overall economy is in better-than-expected shape as the upward revisions in GDP since 2022 were largely the result of better than expected productivity growth–long a big concern for the Canadian economy.

The backdrop of better growth and lower inflation will keep the Bank of Canada on hold for most of 2026, as the next move in rates is likely to be a hike, but not until late next year. In the meantime, the biggest loser in the past year has been the housing market.

Today’s release of existing home sales by the Canadian Real Estate Association suggests particularly weak activity in Ontario, the region hardest hit by the tariff uncertainty. A cautious Bank of Canada will monitor the effect of rapidly rising food prices on inflation expectations. With any luck at all, core inflation will continue to decelerate, keeping the Bank on the sidelines for much of next year.

Hopefully, greater clarity on the Canada-Mexico-US agreement will be forthcoming in the New Year. Reduced uncertainty is the key ingredient required for a rebound in housing activity, particularly in the regions of Ontario and Quebec hardest hit by the tariffs.

Signs of Improvement in Canadian Housing Activity
Today’s release of October housing data by the Canadian Real Estate Association (CREA) showed the national housing market bounced back, with sales and prices rising. Buyers benefited from the interest rate cuts this year.

The number of home sales recorded over Canadian MLS® Systems edged up 0.9% on a month-over-month basis in October 2025, marking six monthly gains in the last seven months.

“After a brief pause in September, home sales across Canada picked back up again in October, rejoining the trend in place since April,” said Shaun Cathcart, CREA’s Senior Economist. “With interest rates now almost in stimulative territory, housing markets are expected to continue to become more active heading into 2026, although this is likely to be tempered by ongoing economic uncertainty.”

New Listings

New supply declined 1.4% month over month in October. Combined with an increase in sales activity, the sales-to-new-listings ratio tightened to 52.2% from 51% in September. The long-term average for the national sales-to-new listings ratio is 54.9%, with readings roughly between 45% and 65% generally consistent with balanced housing market conditions.

There were 189,000 properties listed for sale on all Canadian MLS® Systems at the end of October 2025, up 7.2% from a year earlier but very close to the long-term average for that time of the year.

“As we head into the quiet winter season, we continue to see clues that underlying demand for housing is picking up steam,” said Valérie Paquin, CREA Chair. “All eyes will be on next year’s spring market to see if all that pent-up demand will finally come off the sidelines in a big way.”

There were 4.4 months of inventory on a national basis at the end of October 2025, basically unchanged from July, August, and September and the lowest level since January. The long-term average for this measure of market balance is five months of inventory. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

Home Prices

The National Composite MLS® Home Price Index (HPI) edged up 0.2% between September and October 2025. The non-seasonally adjusted National Composite MLS® HPI was down 3% compared to October 2024, the smallest year-over-year decline since March.

Bottom Line

Homebuyers are responding to improving fundamentals in the Canadian housing market. Supply has risen as new listings surged until May of this year. Additionally, the national benchmark average price is 3.1% lower than it was a year earlier. That decrease was smaller than in September.

Buyers are gradually nudged off the sidelines by lower interest rates and reduced housing prices. While the Greater Golden Horseshoe’s housing activity was dampened by trade uncertainty and earlier overbuilding, even there, the tides are gradually turning. We can look forward to a more robust spring market.

Canadian Inflation Slows in October, But Not Enough to Trigger Another BoC Rate Cut in December

The Consumer Price Index (CPI) rose 2.2% on a year-over-year basis in October, down from 2.4% in September. The all-items CPI decelerated largely due to gasoline prices, which fell at a faster year-over-year pace in October (-9.4%) than in September (-4.1%). Excluding gasoline, the CPI rose 2.6% in October, matching the September increase. This was not enough of a decline to move the Bank of Canada off the sidelines, particularly given the recent strength in manufacturing sales, which surged 3.3% in September (estimated at 2.7%). Wholesale trade also surprised to the upside, 0.6% (estimated at 0.0%).

Slower growth in grocery prices further contributed to the CPI’s deceleration in October, which was moderated by surging cellular phone plan prices. Though grocery prices decelerated in October, prices remained elevated and have exceeded overall inflation for nine consecutive months.

Consumers paid more year over year in October for homeowners’ and mortgage insurance (+6.8%) and passenger vehicle insurance premiums (+7.3%). Among the provinces, prices rose the most in Alberta for both measures, with a 13.7% increase in homeowners’ home and mortgage insurance and a 17.8% increase in passenger vehicle insurance premiums.

Since October 2020, homeowners’ insurance and mortgage insurance prices have risen 38.9% nationally, while passenger vehicle insurance prices have risen 18.9%.

The index for property taxes and other special charges, priced annually in October, rose 5.6% year over year, down from 6.0% in 2024.

The CPI rose 0.2% month over month in October. On a seasonally adjusted monthly basis, the CPI was up 0.1%.

In October, both the CPI median and the CPI trimmed mean came in cooler than economists had expected. The average of these metrics was 2.95% in October.

The old measure of core—prices excluding food and energy—rose 0.3% m/m on an adjusted basis, boosting the yearly rate three full ticks to 2.7% y/y. A pop in cellular services was a significant driver there; in fact, the 7.9% y/y rise in all telephone services was the largest yearly increase since 1982. Still, a pullback in grocery prices, perhaps in part due to the rollback of retaliatory tariffs, helped moderate the Bank of Canada’s core measures. Median prices edged up just 0.1% m/m (s.a.), trimming the annual rate to 2.9%, while trim eased a tick to 3.0% y/y.

Rent perked up again to 5.2% y/y (from 4.8%), and remains the single most significant driver of inflation due to its heavy weight in the index.

Bottom Line

This report does little to change the BoC’s view that underlying inflation remains close to 2-1/2%; but, if anything, most underlying metrics have been stuck a bit above that, or have just crept up there. In other words, this report is just another reason to believe the Bank is moving to the sidelines in December.

Federal Budget Revamp, FY 2025-2026

Today, Finance Minister François-Philippe Champagne presented his first budget. Mark Carney was elected Prime Minister with a mandate to transform Canada’s economy and reduce its dependence on trade with the United States. The Carney government’s inaugural budget emphasizes structural changes to strengthen the domestic economy and boost non-U.S. exports, and it will be funded by an increase in government debt.

Carney, a former central banker who took office in March, has committed to decreasing reliance on the U.S. by increasing military spending, accelerating infrastructure projects, speeding up housing construction, and enhancing business competitiveness. Given the current large deficits and a rising debt-to-GDP ratio, the government cannot afford higher long-term interest rates. Carney has promised to build a stronger Canada using domestic resources and labour, noting that only 40% of the steel used in Canada is produced domestically, and he intends to change that.

Champagne has cautioned that the public service will need to shrink as the government strives to balance the budget in the coming years. Carney also faces a political challenge in convincing some opposition members to support his budget or at least abstain from voting against it. His Liberal Party caucus is currently three seats short of a majority in the House of Commons, meaning it cannot pass the budget on its own.

Unemployment remains high, economic growth is weak, and exporters, along with business investment, are still struggling due to U.S. tariffs. Carney and Champagne must persuade citizens that jobs, real wages, and living standards will eventually improve if they can stimulate both domestic and foreign investment.

Last week, the Bank of Canada indicated that it is nearing the limit of monetary stimulus it can provide without triggering inflation. Governor Tiff Macklem has consistently stated that he sees fiscal policy as a more effective tool to counter the adverse effects of the trade war, which he perceives as a negative supply shock.

The chart above indicates that Canada not only had the lowest deficit-to-GDP ratio in the G-7 but also among all countries with a triple-A credit rating. However, the rate at which we are issuing net new debt is expected to accelerate over the next year or two. Canada needs to assure the bond market that we will maintain our triple-A credit rating to keep financing costs manageable. Ottawa has divided the budget into two parts: the operating budget and the capital spending budget. The operating budget covers the costs of running the federal government, which includes salaries, wages, rent, and interest payments on the debt. Carney has urged government leaders to review their operating budgets and eliminate unnecessary costs, which include downsizing the federal workforce.

A similar approach is used in countries like the United Kingdom and New Zealand, as well as by some provinces here at home. In principle, this shift could enhance transparency by allowing a better understanding of how public funds are allocated between day‑to‑day program spending and long‑term investments intended to boost future growth. The capital spending budget is more complex because it’s harder to determine which expenditures will enhance growth and productivity. For instance, while the government is increasing defence spending to meet our NATO obligations, not all of it will contribute to productivity growth. Ottawa’s agenda highlights major infrastructure projects, defence initiatives, housing, significant undertakings like pipelines, enhanced ports, and the development of the Ring of Fire. Federal leadership believes there is a role for industrial policy, as well as measures aimed at broad deregulation and tax competitiveness.

This year’s federal budget projects a deficit of $78.3 billion—nearly double the Liberals’ projection a year ago—prioritizing capital project spending over services. The deficit is expected to decrease gradually to $56.6 billion by 2029-30. Only a year ago, the Liberals forecast a 2025 budget deficit of $42.2 billion, but that was before trade uncertainty and tariff inflation hit our shores with the inauguration of Donald Trump last January.

The budget presents both downside and upside scenarios. In the downside scenario, ongoing trade uncertainty could worsen the budgetary balance by $9.2 billion annually, while the upside scenario anticipates a $5 billion annual improvement contingent on easing trade uncertainties.

Finance Minister François-Philippe Champagne emphasized the need for “generational” investments, allocating $25 billion to housing, $30 billion to defence, and $115 billion to infrastructure over the next five years. He criticized proposals to cap the deficit at $42 billion, advocating instead for investments to drive future growth.

The 2025 budget introduces a new format that separates capital and operational spending, with capital investments accounting for 58% of this year’s combined deficit. This shift aims to catalyze $500 billion in private-sector investment. However, we should be skeptical that such animal spirits will materialize quickly, given the immense uncertainty about the future of the Canada-Mexico-US free trade agreement.

The budget pledges to balance operational spending in three years.

Ottawa has been running a “comprehensive expenditure review” to spend less on the day-to-day operations of the federal government. According to the budget, that plan will save $13 billion annually by 2028-29, for a total of $60 billion in savings and revenues over five years.

The budget promises more taxpayer dollars will go toward “nation-building infrastructure, clean energy, innovation, productivity and less on day-to-day operating spending.” This “new discipline” will help protect social benefits, the budget promises.

The public service will see a drop of about 40,000 positions over the coming years. The budget projects it will have 330,000 employees in 2028-29, down from the 368,000 counted last year.

To confront an anemic economic picture, the government says it’s “supercharging growth” and vows to “make Canada’s investment environment more competitive than the U.S.”

To that end, the budget introduces a “productivity super-deduction” tax measure that will allow companies to write off a larger share of capital investments more quickly.

There are also new measures specifically for writing off expenses for manufacturing or processing buildings, as well as a new capital cost allowance for liquefied natural gas (LNG) equipment and related buildings.

Build Baby BuildFast-tracking nation-building projects: In close partnership with provinces, territories, Indigenous Peoples, and private investors, the government is streamlining regulatory approvals and helping to structure financing.

Additional Cuts to Immigration

Selling it as Ottawa “taking back control” over an immigration system that has put pressure on Canada’s housing supply and health-care system, budget 2025 promises to lower admission targets.

The new plan proposes to drastically reduce the target for new temporary resident admissions from 673,650 in 2025 to 385,000 in 2026.

The 2026-28 immigration levels plan would keep permanent resident admission targets at 380,000 per year, down from 395,000 in 2025.

Ending Some High-End Taxes

The government is also proposing to undertake a one-time measure to accelerate the transition of up to 33,000 work permit holders to permanent residency in 2026 and 2027.

“These workers have established strong roots in their communities, are paying taxes and are helping to build the strong economy Canada needs,” the budget notes.

To fill labour gaps, the Liberals’ plan includes a foreign credential recognition action fund to work with the provinces and territories to improve transparency, timeliness and consistency of foreign credential recognition.

It would also launch a strategy to attract international talent, including a one-time initiative to recruit over 1,000 highly qualified international researchers to Canada.

In addition, there were billions of dollars in increased defence spending, the details of which are still sketchy.

Bottom Line

Nothing in this budget is surprising, as most of it has been telegraphed in recent weeks. The budget asserts that “the global trade landscape is changing rapidly, as the United States reshapes its economic relationships and supply chains around the world. The impact is profound—hurting Canadian companies, displacing workers, disrupting supply chains, and creating uncertainty that holds back investment. This level of uncertainty is greater than what we have seen in recent crises. Budget 2025 makes generational investments while maintaining Canada’s strong fiscal advantage—a foundation that allows us to invest ambitiously and responsibly, and build Canada’s economy to be the strongest in the G-7.”

Canada has the lowest net debt-to-GDP ratio among the G-7 and one of the smallest deficit-to-GDP ratios. Canada and Germany are the only two G-7 economies rated triple-A, a marker of strong investor confidence which helps keep our borrowing costs as low as possible. This is a time for bold actions to bolster Canada’s competitiveness. We have products the world needs. Hopefully, we can salvage a significant part of the trade agreement with the US, but the odds suggest we build the infrastructure necessary to trade our products worldwide.

Canadian Inflation Stronger Than Expected

The Consumer Price Index (CPI) rose 2.4% on a year-over-year basis in September, up from a 1.9% increase in August. The acceleration in headline inflation from 1.9% in August was also larger than the median projection in a Bloomberg survey of economists, which was 2.2%.

On a year-over-year basis, gasoline prices fell less in September (-4.1%) compared with August (-12.7%) due to a base-year effect, leading to an acceleration in headline inflation. Excluding gasoline, the CPI rose 2.6% in September, after increasing 2.4% in August.

A slower year-over-year decline in prices for travel tours (-1.3%) and a larger increase in prices for food purchased from stores (+4.0%) also contributed to the upward pressure in the all-items CPI in September.

The CPI rose 0.1% month over month in September. On a seasonally adjusted monthly basis, the CPI was up 0.4%.

Gasoline prices fell 4.1% year over year in September after a 12.7% decrease in August. The smaller year-over-year decline was primarily due to a base-year effect. In September 2024, prices fell 7.1% month over month due, in part, to lower crude oil prices amid growing concerns of weaker economic growth, particularly in China and the United States. In September 2025, gasoline prices rose 1.9% monthly following refinery disruptions and maintenance in the United States and Canada, which put upward pressure on prices.

On a year-over-year basis, prices for travel tours fell 1.3% in September following a 9.3% decline in August. Despite typically declining on a month-over-month basis in September, travel tour prices rose 4.6% in the month. This was a result of higher prices for destinations in Europe and some parts of the United States, as significant events in destination cities put upward pressure on hotel prices.

Consumers paid 4.0% more year over year for food purchased from stores in September, following a 3.5% increase in August. Faster price growth was driven by increased prices for fresh vegetables (+1.9% in September, compared with -2.0% in August) and sugar and confectionery (+9.2% in September, compared with +5.8% in August).

Year-over-year grocery price inflation has generally trended upward since its most recent low in April 2024 (+1.4%). Grocery items contributing to the general acceleration included fresh or frozen beef and coffee, both due, in part, to lower supply.

Tuition fees, priced annually in September, increased 1.7% in 2025 compared with a 1.8% increase in 2024. Aside from 2019, the 2025 increase was the smallest since 1976, when the index was unchanged (0.0%).

In 2025, students from Prince Edward Island (+4.7%) experienced the largest price increase. At the same time, students from Nova Scotia (+1.1%) and Ontario (+1.1%) had the smallest increase, coinciding with a freeze on tuition fees in both provinces.

Bank of Canada Deputy Governor Rhys Mendes recently warned that traders may be putting too much emphasis on its two “preferred” core inflation measures, the so-called trim and median gauges.

In September, both CPI-median and CPI-trim came in hotter than economists were expecting. The average of these metrics was 3.15% in September, while the three-month moving average accelerated to 2.7%.

Mendes said the central bank is weighing a broader suite of gauges that suggest underlying price pressures are closer to its 2% target.

Shelter inflation rose 2.6% on an annual basis, while CPI excluding food and energy was 2.4%. CPI excluding eight volatile components and indirect taxes was 2.8%, up from 2.6%.

CPI excluding taxes accelerated to 2.9% from 2.4% the previous month.

The share of components within the consumer price index basket that are rising 3% and higher — another key metric that policymakers are watching closely — declined slightly to 38%.

All 10 Canadian provinces saw prices rising at a faster year-over-year pace in September compared with August. Quebec experienced the steepest price growth, reaching 3.3% last month.

Rent prices also accelerated nationally to 4.8%, led by a 9.8% increase in Quebec. Slower rent price growth of 1.8% in British Columbia moderated the national increase, the report noted.

Bottom Line

The report shows that underlying price pressures remain elevated, raising questions about how quickly the central bank can proceed with rate cuts to aid the tariff-hit economy.

Still, the acceleration in headline and most core measures was driven by a gasoline price base-year effect — a possible reason for analysts to look through the print.

Traders in overnight swaps pared bets on a rate cut next week, lowering the odds to about 65% from close to 80% before the report. The loonie jumped to the day’s high against the US dollar. Canadian debt fell across the curve, with the two-year yield rising about three basis points to a session high at 2.38%.

The ongoing trade war with the US drove the Bank of Canada to lower its policy rate by a quarter of a percentage point to 2.5% in September, marking the first cut in six months.

During their deliberations last month, some members of its governing council argued that more support would likely be needed given the softness in the economy, notably if the labour market weakened further.

Bank of Canada Governor Tiff Macklem recently described Canada’s labour market as “soft,” despite data showing the country added 60,400 jobs in September, which only partially reversed a decline of more than 100,000 positions over the previous two months.

Canadian Home Sales Post Best September In Four Years
Today’s release of the September housing data by the Canadian Real Estate Association (CREA) showed a pullback on the housing front. The number of home sales recorded through Canadian MLS® Systems declined by 1.7% on a month-over-month basis in September 2025. Nevertheless, it was the best month of September for sales since 2021

The slight monthly decline was the result of lower sales activity in Greater Vancouver, Calgary, Edmonton, Ottawa, and Montreal, which more than offset gains in the Greater Toronto Area and Winnipeg.

“While the trend of rising sales that began earlier this year took a breather in September, activity was still running at the highest level for that month since 2021, and that was true in July and August as well, said Shaun Cathcart, CREA’s Senior Economist. “With three years of pent-up demand still out there and more normal interest rates finally here, the forecast continues to be for further upward momentum in home sales over the final quarter of the year and into 2026.”

New Listings

New supply dropped 0.8% month-over-month in September. Combined with a slightly larger decline in sales activity, the sales-to-new listings ratio eased slightly to 50.7% compared to 51.2% in August. The long-term average for the national sales-to-new listings ratio is 54.9%, with readings roughly between 45% and 65% generally consistent with balanced housing market conditions.

There were 199,772 properties listed for sale on all Canadian MLS® Systems at the end of September 2025, up 7.5% from a year earlier but very close to the long-term average for that time of the year.

“While there are more buyers in the market now than at almost any other point in the last four years, sales activity is still below average and well below where the long-term trend suggests it should be,” said Valérie Paquin, CREA Chair. “As such, we expect things to continue to pick up steadily in the future.

There were 4.4 months of inventory on a national basis at the end of September 2025, unchanged from July and August and the lowest level since January. The long-term average for this measure of market balance is five months of inventory. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

Home Prices

The National Composite MLS® Home Price Index (HPI) was again almost unchanged (-0.1%) between August and September 2025. Following declines in the first quarter of the year, the national benchmark price has remained mostly stable since April.

The non-seasonally adjusted National Composite MLS® HPI was down 3.4% compared to September 2024. Based on the extent to which prices fell off beginning in the fall of 2024, look for year-over-year declines to shrink in the fourth quarter of the year.

Bottom Line

Homebuyers are responding to improving fundamentals in the Canadian housing market. Supply has risen as new listings surged until May of this year. Additionally, the national benchmark average price is 3.5% lower than it was a year earlier. That decrease was smaller than in August.

The view is nearly unanimous that the Federal Reserve will cut the overnight policy rate again by 25 basis points when it meets again on October 29.

The jury is out on the Bank of Canada’s next move. Their decision date is also October 29. While the stronger-than-expected labour market report might have dissuaded the Bank from easing, all eyes will be on the next CPI report on October 21.

With the Bank of Canada cutting the policy rate halfway through September and another 25-basis-point reduction expected by January, if not sooner, the CREA forecasts sales to rise by 7.7% in 2026.

“Interest rates were always going to be the thing that brought this thing back to life,” Cathcart said in an interview. “While that long-anticipated recovery has been delayed and dampened by trade uncertainty, the Bank of Canada is getting close to dipping out of the neutral range and into stimulative territory.

Canadian Employment Rises More Than Expected, But Not Enough To Fully Offset Prior Two-Month Job Loss

Today’s Labour Force Survey for September was stronger than expected, with a net employment gain of 60,400, but the unemployment rate was steady at 7.1% as more people entered the workforce. The employment gain was driven by full-time work. The manufacturing sector–hard hit by US tariffs–added 27,800 employees, and agriculture, health care and other services all added workers. The employment rate — the proportion of the working-age population that’s employed — rose 0.1 percentage points to 60.6% in September.

Average hourly wages among employees increased 3.3% (+$1.17 to $36.78) on a year-over-year basis in September, following growth of 3.2% in August (not seasonally adjusted).

The surprisingly strong job gains suggest Canada’s job market is showing some resilience to tariff disputes with the US. The jump in factory employment, although not driven by autos, suggests the sector may benefit from some exporters’ exemption from levies under the Canada-US-Mexico trade Agreement.

The loonie surged in response to the news as shorter-term interest rates rose. The report reduces expectations for a rate cut when the Bank of Canada meets again on October 29, with traders putting the odds at about 25%, down from 70% before the data release. However, the better-than-expected job gains did not fully offset the losses posted in July and August, as Canada shed a net 45,900 jobs over the third quarter, the weakest quarter since the pandemic.

Total hours worked fell 0.2% last month, and the labour force rose by 72,300.

Even with the latest jobs report, the Canadian economy remains vulnerable to the unsettling US attitude towards the free trade agreement, which is slated to be renegotiated by July 2026. The Bank of Canada cut the overnight policy rate to 2.5% in September, and additional rate cuts are likely this year. The Bank has only two more decision dates in 2025: October 29 and December 10. September inflation data will be released on October 21, the day after the BoC publication of the Business and Consumer Outlook Survey.

The overall unemployment rate was unchanged at 7.1% in September, following a 0.2 percentage point increase in August. Since the start of 2025, the unemployment rate has increased by 0.5 percentage points. The trend has generally been upward since the beginning of the year, with an increase of 0.6 percentage points compared to January. Youth unemployment rates remain elevated, with the jobless rate among students at a whopping 17.1%, and at 11.9% for youth not attending school.

Employment in manufacturing rose in September (+28,000; +1.5%), the first increase since January. The gain was concentrated in Ontario (+12,000) and Alberta (+7,900). Before the rise in September, employment in manufacturing had recorded a net decline of 58,000 (-3.1%) from January to August.

Employment change by industry, September 2025

In Quebec, employment was little changed for a third consecutive month in September. The unemployment rate in Quebec in September (5.7%) was down from the recent peak of 6.3% recorded in June, and little changed on a year-over-year basis. However, Quebec will undoubtedly see job losses in the aluminum and lumber industries unless US tariffs are reduced sharply.

Employment was also little changed in Ontario in September. The unemployment rate in the province increased by 0.2 percentage points to 7.9% in September, as more people searched for work. The unemployment rate in the province was up 0.8 percentage points from September 2024. In the CMA of Toronto, the unemployment rate was unchanged at 8.9% in September 2025 and was up 0.8 percentage points on a year-over-year basis (three-month moving averages).

Bottom Line

The Bank of Canada has made it clear that it will focus on inflation as well as on increasing slack in the economy, and a September cut may still hinge on the consumer price index released next week. Labour markets are still softer than they were a year ago. The unemployment rate held steady at 7.1% in September, but it remains up half a percent from a year ago. International trade data softened in August, and U.S. tariffs remain a significant threat to the economic outlook.

It is doubtful that Bank of Canada policymakers thought in September that just one cut in the overnight rate would be enough to address economic weakness, and the labour force data today probably isn’t positive enough alone to derail another cut in October. Still, the Bank of Canada will also have to take into account the next round of inflation data – and future cuts beyond October would be less likely if government deficit spending ramps up as expected to help address tariff-related economic weakness.

The central bank is well aware that the Labour Force Survey is notoriously volatile, and the jobless rate at 7.1% is still up half a percentage point from a year ago. The underlying details of the report were not as positive. Actual hours worked declined despite the surge in full-time employment. And permanent layoffs ticked higher. But other sectors have remained broadly resilient. Services employment was up 18k month-over-month and 225k year-over-year last month.

If you are reading this you probably have a keen interest in improving your financial situation — but how are you going to measure your progress?

The easiest way is by setting and achieving a goal. This could be short-term and focused, like wiping out a credit card debt. On the other hand, it could be a long-term goal like burning the mortgage five years ahead of time after twenty years of scrimping and saving.

Achieving either of these goals is a great accomplishment, but they may not tell the whole story. The problem with both of them is they are independent from all of the other factors that affect your financial standing. What if the value of the house you just paid off has dropped 20% over the last year, or you eliminated one credit card balance only to see another card or line of credit head in the opposite direction?

No single metric tells the whole story of your financial progress. Paying yourself first and diligently putting $300 from every paycheque into your RRSP will definitely help you hit your retirement goals. However, you also need to monitor the growth from investing your RRSP as well as any other assets that are contributing to your retirement fund and ensure the total value is steadily tracking towards your goal.

Cash flow is another common measure of financial progress. Tracking your income and expenses helps you understand how much money you have available after covering your costs. Positive cash flow is a surplus that can be used for saving, investing, or paying down debt — but it doesn’t measure how effective you were at putting that cash surplus to work. You may think you are making progress, but if you let the cash sit in a bank savings account instead of a GIC in your TFSA, then you actually made comparatively poor progress.

If you want to keep it simple and look at only one metric to get a holistic view of your financial health, measuring your net worth can provide you with valuable insights. It’s an easy-to-understand concept that will help you analyze your financial health and overall progress towards your financial goals.

Calculating your net worth isn’t all that difficult and although it represents only a snapshot in time, the main advantage is that it provides a comprehensive snapshot. It takes into account all of your assets (such as cash, investments, real estate, and valuable possessions) and subtracts your liabilities (such as debts and loans). Monitoring your net worth forces you to be aware of all your financial accounts and can help you make more informed decisions about your spending, saving, and investing habits.

As you work to increase your assets and reduce your liabilities, your net worth should show positive growth. This signifies that you’re making smart financial decisions and accumulating wealth over time. Seeing your net worth increase can be motivating and reinforce positive financial behaviors. On the flip side, if you notice a decline, it can signal that you need to reevaluate your financial decisions and make necessary adjustments.

Monitoring your net worth helps you understand how effectively you’re building wealth. Although the market value of assets such as stocks or real estate fluctuate, comparing your net worth to previous periods can still help you evaluate the effectiveness of different financial strategies you’ve implemented. This allows you to refine your approach and make changes as needed.

Your net worth is an essential factor in assessing your retirement readiness. It helps you determine if you’re on track to maintain your desired lifestyle during retirement and whether you need to adjust your savings and investment strategies. It can also influence your estate planning decisions. It’s important for determining how you want your assets distributed after your passing and for considering strategies to minimize potential estate taxes.

There are lots of ways to measure financial growth and no one method is perfect, but keeping an eye on your net worth is a relatively easy task that will do wonders for your motivation — why not give it a try?