Canada’s Economy Is Feeling The Gas Price Squeeze

What’s going on here?

Canadian drivers just got hit with a nasty gas-price spike, and TD says it’s already showing up in softer spending and a cooling jobs backdrop.

What does this mean?

TD’s take on Canada’s March Labor Force Survey is that the job market is losing steam right as households face a fresh energy-price shock. Retail gas prices jumped 23% month over month in March and were up 8.4% from a year earlier, stretching budgets that were already tight. TD Spend data show seasonally adjusted spending growth slowed to 0.2% from 0.6%, and the bank says the “real” picture likely looks weaker once you account for pricier fuel. Gas stations did the heavy lifting – nominal outlays rose 8% on the month – and TD estimates that excluding gasoline, overall card spending would’ve fallen, with groceries down and services flat as travel and recreation cooled.

Why should I care?

For markets: Rate cuts just got murkier.

Without the fuel shock, slower growth could make Bank of Canada cuts easier to justify. But a jump in pump prices can push up headline inflation, giving the BoC a reason to wait and lean harder on core inflation and expectations. That matters for bond yields – and for rate-sensitive areas like housing, retailers, and other consumer-facing stocks that depend on steady discretionary spending.

The bigger picture: An inflation bump that feels like a tax.

More money going to gas is money not going to everything else. TD says gasoline was the main driver of spending, and excluding it, total card outlays likely fell – a sign households are offsetting higher fuel bills by trimming groceries, travel, and recreation. If that keeps up, Canada could end up with weaker real growth even as inflation reads hotter for a while, a tricky mix for policymakers.

Original article: Canada’s Economy Is Feeling The Gas Price Squeeze