QUARTERLY MARKET INTELLIGENCE
Canadian Economic Update Report
Q2 2026
Whitehorn Capital's Canadian Economic Update presents performance trends, economic drivers, and transaction activity observed during the past quarter nationwide, with a focus on Western Canada.
Whitehorn Capital Inc.
Corporate Finance & Advisory
Public Market Dashboard
Year to date as of June 30, 2026.
S&P/TSX Composite Index
▲+9.9%
Boosted by energy stocks and broader commodity tailwind.
NASDAQ Composite Index
▲+12.8%
Powered by AI / semiconductor cycle and megacap tech rally.
S&P 500
▲+9.0%
Witnessed a 27% drawdown in April from Dec. 2025 highs before fully reversing in May.
Key Quarterly Highlights
APRIL 13
Toyota Canada to invest over $300MM to build a new head office building in Toronto and two new parts distribution centres in Surrey and Calgary respectively
APRIL 15
According to the Canadian Federation of Independent Business (CFIB), business exits outpaced business entries in Canada for the sixth consecutive quarter
MAY 7
Retailer Warehouse One Clothing filed for CCAA on May 6 and will close all 128 stores operating under the Warehouse One and Bootlegger banners. The company is not pursuing a restructuring nor a sale.
MAY 14
Richmond, BC based UniUni, a last-mile delivery company, files for IPO via a reverse SPAC merger at a valuation of $1.37B. The IPO is expected in late 2026.
JUNE 26
Danish home goods retailer Flying Tiger to enter Canadian market with five new stores outlined for 2026.
Macroeconomic Updates
The following sections cover key macroeconomic drivers for Canadian business owners and leaders.
Monthly Unemployment Rate (May 2026)
Canada
6.6%
BC
6.8%
AB
6.6%
SK
6.2%
MB
5.5%
·Canada added 88,000 jobs in May, reversing a weak Q1 in job data. May 2026's reading of 6.6% is below the August 2025 peak of 7.1% but still higher than pre-pandemic norm of 6.0%.
·BC remains flat. Despite 25,000 new jobs added in May, hiring momentum remains weak with overall population declining.
·AB is open for work. 14,000 jobs added and unemployment falling from 7.0% in April to 6.6% in May. AB recorded a +4.1% job growth year over year, the strongest of all provinces. Energy and infrastructure driven demand are attracting more workers.
·SK experienced a 2nd consecutive month of unemployment rate increase in May but remains below the national average.
·MB's 5.5% is the lowest among Western Canada.
·The retail and wholesale sector demonstrated weakness with 35,000 jobs lost nationwide in May. Despite headline employment improving, consumer spending remains soft.
Whitehorn 2026 Outlook
We anticipate national unemployment to remain around 6.6% for the remainder of 2026. Western Canadian job growth is expected to trend above the national average. If CUSMA trade negotiations stall or are further disrupted, we forecast national unemployment to trend closer to 7%.
Inflation - Consumer Price Index (12-month % Change)
CPI (May 2026)
3.20%
CPI excluding energy (May 2026)
2.20%
·Inflation rose to 3.20% in May 2026 with accelerating energy inflation being the key driver.
·With the US-Iran war entering a third month, global oil prices continued its climb to the highest level since June 2022. As a result, gasoline prices were higher by 33.2% year over year.
·Excluding gasoline prices, the CPI reading was 2.20%, fairly close to the Bank of Canada's headline inflation target.
·Grocery prices were higher by 4.3% in May, the 16th consecutive month this category outpaced headline inflation.
·Shelter costs was +1.7% in May, the 13th consecutive month of deceleration. On the rental front, national rental costs fell by 4.7% year over year.
·We continue to keep an eye out on further tensions in the Middle East and the outcome of the CUSMA review, which could materially affect inflation for the remainder of 2026.
Whitehorn 2026 Outlook
With the US and Iran seemingly agreeing to a ceasefire and the reopening of the Strait of Hormuz, we expect inflation to ease as we enter the second half of 2026. We do not expect any Bank of Canada rate hikes throughout 2026 as core inflation remain close to the 2% target.
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Canadian Wholesale Sales ($B)
May 2026 month-over-month
-0.7%
May 2026 year-over-year
+21.1%
·Canadian wholesale sales was expected to decline by 0.7% in May 2026 (+0.6% in April). The decline is due to lower sales in machinery, equipment and supplies as per Statistics Canada.
·The material increase from Feb. 2026 to Mar. 2026 was due to a material spike in oil prices due to the US-Iran conflict. Excluding petroleum and other hydrocarbon products, wholesale sales rose by 0.5% in April 2026.
·The building materials and supplies subsector rose by 4.3% or $12.7B, the largest increase of all subsectors excluding petroleum. This signals continued construction and infrastructure investment demand.
·Core wholesale sales excluding petroleum and other hydrocarbon products (in volume terms) declined by 0.3% in April.
Whitehorn 2026 Outlook
We expect Canadian wholesale sales to increase by 1-1.5% in 2026. We expect a rebound in H2 2026 (excluding petroleum) as oil prices stabilize further and assuming CUSMA trade talks go smoothly.
Western Canadian Housing Starts by Quarter
·Q1 2026 represents the first quarter since Q2 2024 where BC housing starts exceeded AB. BC experienced a 27.3% increase in housing starts in Q1 year over year. However, the increase was due to a weaker Q1 2026 baseline when the province suffered a sharp employment downturn.
·Despite the pullback, AB remains one of the strongest housing markets per capita with record high rental starts now shifting into completions.
·Nationwide, the number of housing starts amounted to 51,211 in Q1, an +8.2% increase year over year.
·SK demonstrated the largest year over year decline of -41% in Q1 that follows a material run-up in 2023-2025. A supply overhang is now being observed where developer risk appetite has softened and supply begins catching up with demand.
·With the record housing starts in 2025 turning into completions throughout 2026, supply should outpace demand for the remainder of 2026.
Whitehorn 2026 Outlook
With the record housing starts in 2025 now being completed in 2026, supply is catching up with demand this year. We expect developers to continue focusing on completions over new starts in H2 2026. Sinking building permits support this hypothesis while CUSMA renegotiations will be the centre of attention with its impact on building material costs.
Why the USD is Beating the Loonie - Even with Oil Up
If your private business sells into the US or you deal with suppliers south of the border, note the following: the higher oil, higher Loonie relationship doesn't necessarily hold anymore. Instead, it's about the gap between Canadian and US interest rates. We dive deeper into the data below:
Past: The Loonie Moved with Oil (2000–2017)
0.9258
Correlation
Jan 2000 – Dec 2017
What does this mean?
Oil up = CAD strong; Oil down = CAD weak
·Historically, the Canadian dollar acted as a prominent commodity currency.
·As crude oil represents a foundational share of our exports to our largest trading partner south of the border, the CAD/USD FX rate was naturally responsive to WTI movements.
·When oil prices rose, a combination of capital inflow to the Canadian energy sector and the demand for Canadian oil would boost CAD demand.
·On the other hand, global oil oversupply or demand collapses, as evident in 2008 and 2014, typically led to a CAD depreciation.
The relationship was less evident from 2018 onwards. From Jan. 2018 to May 2026, we calculated a correlation of 0.1102 between the two variables. It was increasingly evident that there were other driving forces behind the weakening Loonie, especially from 2024 onwards. Our investigations led us to an increasingly prominent factor, the divergence in monetary policies between both countries.
The Split
In the early 2020s, both the Bank of Canada and the Federal Reserve hiked rates in lockstep until 2023. Since Q2 2024, there has been a material divergence in monetary policy between both central banks.
·The Bank of Canada started cutting rates in June 2024, which signaled the beginning of the divergence.
·The Federal Reserve only began cutting rates in Aug. 2024. In addition, the Bank of Canada reduced rates further compared to its U.S. counterpart since then.
·The current spread between the two nations is 1.50 percentage points.
How a Rate Gap Resulted in a Weaker Loonie
The chain of cause and effect is summarized below.
Step 1
🏦
US Bonds Pay More
A 90-day US T-bill yields ~1.5pp more than the Canadian equivalent. Same risk, better return.
Step 2
💰
Capital Chases Yield
Pension funds, banks, and investors worldwide shift money out of CAD assets into higher-paying USD assets.
Step 3
💱
To Buy US Bonds, Sell CAD First
Every shift requires converting CAD to USD. This selling pressure pushes USD/CAD up directly.
Step 4
📉
CAD Weakens — Even If Oil Rises
Rate-driven capital flows are larger and faster than oil-trade flows, so they dominate currency pricing.
0.4682
Correlation
Rate Spread vs. USD/CAD
What does this mean?
Interest rate spread is a better predictor of USD/CAD today than oil prices.
Why Canada Cut Rates Faster than the US
Below, we review three factors behind the divergence:
01
Canadian Economy Cooled Faster
Weaker Canadian GDP and softening labour market as key indicators.
BofC cut rates 9 times between June 2024 and Oct. 2025 for a 275-basis points reduction combined.
02
US Inflation Remained Hotter
Persistent core inflation and tariff-driven price pressure in the U.S. kept the Fed more cautious.
The Fed paused rate cuts for the most of 2025 despite pressure from Trump, while Canadian inflation returned to target earlier in 2024.
03
Tariffs Hit Canada Harder
US imposed tariffs weighed heavily on Canadian exports and business investment given high Canadian exposure to the US market.
The BofC was forced to be more accommodating to absorb the economic shock whereas the Fed had less reason to ease aggressively.
Bottom Line for Private Canadian Businesses
If your business carries USD costs, debt, or receivables, keep an eye out for the BofC-Fed spread when determining your USD exposure. With a rate hike expected in the US in H2 2026 while the BofC maintains status quo, we anticipate the Loonie to perform weaker than the USD for the remainder of 2026.
ent
Select Merger & Acquisition Transactions
Notable transactions this past quarter focused on Western Canadian companies.
Date
Acquirer
Target
Description
Apr. 2026 (Dealership)
Inland Truck & Equip
Burnaby, BC
Edmonton Kenworth
Edmonton, AB
Acquisition of off-road heavy haul trucks dealership (sales, parts, service, body shop) with six locations to enter into Alberta market and to expand service network.
Apr. 2026 (Info. mgmt.)
Consentia
Edmonton, AB
Micro Com Systems
Vancouver, BC
Acquisition of document scanning services and data capture solutions provider to expand Western Canadian presence and to enhance service capacity.
Apr. 2026 (Distribution)
Imperial Dade
Mississauga, ON
Enterprise Paper
Coquitlam, BC
Acquisition of distributor of paper, packaging and janitorial products with locations in BC and AB to increase market share nationwide.
May 2026 (Specialty services)
Orkin Canada
Mississauga, ON
Westside Pest Control
Coquitlam, BC
Acquisition of multidisciplinary engineering company offering ECMP services with 50+ staff across Alberta, the Yukon and the Maritimes.
May 2026 (Retail)
Diversified Royalty
Vancouver, BC
Mr. Lube + Tires
Edmonton, AB
$235MM acquisition of automotive service chain providing vehicle maintenance services with 187 locations nationwide for 4.0x EBITDA.
June 2026 (Industrial)
BridgeWerk & investors
Various
Tetrad Insulation Services
Sherwood Park, AB
Acquisition of industrial insulation provider serving customers across Western Canada.
June 2026 (Specialty services)
PGW Auto Glass
Cranberry Township, PA
Windshield Surgeons
Calgary, AB
Acquisition of Canadian automotive glass business to grow market presence and expand offerings.
June 2026 (Consumer services)
AutoCanada (TSX:ACQ)
Edmonton, AB
Mascarin Collision Centre
Thunder Bay, ON
Acquisition of collision repair business with 20,000 sq ft of capacity to expand geographic presence.
Check out more transactions on our website.
Let's talk about your next move.
Whitehorn Capital provides sale of business, financing, and merger & acquisition advisory services to Western Canadian software & tech companies. To discuss this quarter's findings, reach our team below.
Whitehorn Expert
Greg Quinn, CA, CBV
Address
3332 20 St SW Suite 406, Calgary, AB T2T 6S1
All financial data has been sourced from LSEG Workspace. This report is prepared by Whitehorn Capital Inc. for informational purposes only and does not constitute investment, legal, or tax advice. Figures may include forecasts and are subject to change without notice.
Whitehorn Capital Inc.
Head Office
Address: Whitehorn Capital
3332 20 St SW Suite 406,
Calgary, AB T2T 6S1
Phone: 403-680-4266
