In April 2025, Canada’s annual inflation rate decreased to 1.7%, down from 2.3% in March, marking the lowest rate since September 2021. This decline was primarily driven by a 12.7% drop in energy prices, notably an 18.1% decrease in gasoline prices, following the removal of the federal consumer carbon tax . However, core inflation measures, which exclude volatile items like energy and food, rose to 3.2% (CPI-median) and 3.1% (CPI-trim), the highest since March 2024 . These persistent core inflation pressures present a challenge for the Bank of Canada as it approaches its next interest rate decision on June 4
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Confidence Crisis: Inflation, Housing Woes, and Tariff Uncertainty Weigh on U.S. Consumers
by sigmanomics
written by sigmanomics
Consumer sentiment in the United States declined again in May. This marks the fifth straight month of decline, bringing the index close to its all-time low from 2022. The University of Michigan has released a preliminary report. This report indicates that the consumer sentiment index decreased to 50.8 in May. This represents a decline from 52.2 in April. It signals ongoing weakness due to increasing anxiety about inflation, economic uncertainty, and rising living costs.
The report also revealed a sharp increase in inflation expectations. The median 12-month inflation forecast jumped to 7.3 percent, up from 6.5 percent the previous month. This surge shows how worried households are about ongoing price pressures. This is happening even as the overall economy appears resilient.
Despite job creation, rising incomes, and low unemployment, confidence levels remain strikingly low. This disconnect suggests that other pressures are weighing heavily on the American consumer. Market volatility, high interest rates, and elevated prices are contributing to widespread caution. In addition, the labor market is showing signs of modest softening, with job openings declining and lending standards tightening. Consumers are facing challenges with low housing affordability and political uncertainty. Both factors are increasing the feeling of instability. While tariff-related concerns continue to dominate headlines, the extreme level of pessimism remains difficult to reconcile with the current economic fundamentals.
There are reasons to believe that the decline in confidence may be nearing a bottom. A recently announced tariff agreement between the United States and China may boost consumer sentiment in the coming months. However, it arrived too late to affect most of the responses from May. If this trend toward tariff reduction continues, it may provide relief to both consumers and businesses. Furthermore, considering the current low sentiment index, there may be little room for further declines. This is unless inflation rises significantly beyond expectations. The labor market continues to be a crucial support. Unless it declines significantly, we may see a rebound in sentiment later this year.
A significant feature of the current economic landscape is the disparity between two key indicators. These are the University of Michigan’s Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index. The latter remains higher, hovering just above early-pandemic lows. The discrepancy between the two indicators likely stems from their different focus areas. The Michigan index closely tracks household finances. In contrast, the Conference Board’s measure responds more to labor market conditions. Historically, large gaps between these two indicators have often preceded economic downturns, suggesting caution in interpreting their signals in isolation.
Shifting our focus to the housing sector reveals important insights. Recent data indicates that the U.S. housing market is largely stagnant. It is showing little to no movement. The April report on new residential construction shows that housing starts have mostly stayed the same as last month. Notably, both single-family and multifamily construction activities have demonstrated a consistent level of steadiness throughout the majority of the year. This ongoing stability in construction figures indicates a notable lack of progress in the sector. It raises questions about the factors causing this stagnation. Stakeholders and investors may need to reevaluate their strategies due to these developments. The housing market seems to be facing uncertainty and limited growth potential.
Written by Sigmanomics Team
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