Carney's Canada goes to the polls amid most economic uncertainty ever

The former head of both the UK and Canadian central banks faces a geopolitical landscape where President Trump is repeatedly threatening to make Canada the 51st state and tariffs threaten to kneecap the key automotive and aluminum industries. Meanwhile, Canadian tariffs on Chinese EVs have resulted in retaliatory measures from one of the key customers of Canada's agricultural exports.

The Economic Policy Uncertainty index is based on newspaper coverage and searches articles for key terms. For Canada, it targets five outlets: the Montreal Gazette, the Vancouver Sun, the Toronto Star, the Ottawa Citizen, and the Globe and Mail. The indicator counts the number of news articles containing the terms "uncertain" or "uncertainty," "economic" or "economy," and terms like "policy," "tax," "spending," "regulation," "central bank," "budget," and "deficit."

Uncertainty, as measured by this index, began increasing steeply after Trump won the November 2024 US election; it soared further to an all-time high in January as Trump took office and stepped up his trade rhetoric. The index has surpassed the levels seen at the time of the pandemic outbreak in 2020; while the US and Mexico have also seen growth in their own versions of this index, it did not surge to an all-time high.

Besides the trade threats, Canada is experiencing another form of uncertainty amid the aggressive return of inflation. February price growth accelerated from 1.9% in January to a 2.6% pace year-on-year -- an eight-month high and surpassing expectations. This was partly due to the end of a sales-tax break that expired mid-month (and, ironically, led to Trudeau's departure after his finance minister resigned, citing her opposition to that policy).

As of March 24, CEIC's proprietary, machine learning-driven nowcast projects that inflation for this month will hold at about 2%. However, in the week that ended March 24 alone, our inflation nowcast jumped to 2.4% from 2% in the previous week.

GDP trends have stayed more positive; economic growth had accelerated for three quarters in a row as of Q4 2024. CEIC's nowcast is projecting further acceleration in Q1, with GDP growth reaching 2.5%.