RBC Economics flags a bump in July CPI and bigger risks as Section 338 tariffs approach
Canada's mortgage professionals head into a pivotal week, with two economic pressure points converging: a monthly inflation reading and a US tariff deadline poised to test trade nerves on both sides of the border.
Statistics Canada is set to release the Consumer Price Index (CPI) for July on Monday, August 17. A new report from RBC Economics, authored by Nathan Janzen, senior economist, and Claire Fan, economist, expects the numbers to nudge higher before a tougher headline hits Wednesday.
The economists project year-over-year CPI climbed to 2.9% in July, up from 2.8% in June, driven by a renewed acceleration in energy costs.
Gasoline prices rose at a slower year-over-year rate in June (+20.5%), but RBC Economics estimates the pace picked up again in July, with gasoline averaging approximately 25% above year-ago levels, as ongoing conflict in the Middle East continued to disrupt shipping through the Strait of Hormuz.
For brokers monitoring the Bank of Canada's (BoC) rate path, the headline figure matters less than what sits beneath it. Prices excluding food and energy are expected to tick to 1.9% from 1.8%, while the BoC's preferred median and trim core measures are projected to hold near 2%.
"Growth in 'core' measures' prices have remained near the 2% target," the report said. Food price growth likely eased marginally in July but remained above 3%, according to the RBC forecast.
As Canada's inflation data arrives, the broader trade environment continues to cloud the Bank of Canada's rate outlook, with economists still firmly expecting the central bank to hold through 2026.
Section 338 tariffs: real, but contained
A weightier development lands Wednesday. US Section 338 tariffs covering roughly 5% of Canada's goods exports — including apparel, electronics, and electrical appliances manufacturing — are scheduled to take effect August 19.
"The deadline has fast-tracked trade talks between Canada and the US, but the odds of a full resolution of all trade irritants before Wednesday remain low," the report said.
RBC Economics estimates the targeted goods cover approximately 0.4% of Canadian gross domestic product (GDP) and employment. That's a manageable drag at the national level, though potentially painful for specific manufacturing sectors.
The US-side exposure is minimal. The affected products represent about 0.5% of all US imports globally, and are broadly substitutable.
Critically, "80% of Canada's exports to the US remain duty free under CUSMA exemptions," the report said, a buffer that should contain the broader economic fallout.
Housing and retail round out a busy week
Tuesday's home resale data is expected to show diverging regional trends netting out to roughly flat activity and prices month over month nationally. Housing starts are projected at an annualised 240,000 units in July, little changed from June.
Friday's retail sales figures should show a nominal increase in June, supported by a temporary dip in gasoline prices.
"Consumer spending remained resilient in Q2 and is poised to add to real GDP growth in the quarter," the report said. That's a modest but meaningful signal for mortgage professionals tracking client borrowing capacity heading into the second half of 2026.
BMO chief economist Doug Porter told Canadian Mortgage Professional the bank's economists are "getting ever so slightly more positive" about the Canadian economic forecast, even if they aren't expecting a huge upsurge in activity before year-end.
The bigger picture on where Canada's housing market is heading may depend less on any single data release this week than on whether Wednesday's tariff trigger reshapes confidence, and the BoC's calculus, through the fall.
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