Crime, Ontario and Thunder Bay

  

Statistics Canada released the police reported crime statistics for Canada in 2025 last week and the overall trends were a decline in both the conventional Crime Rate (CR) as well as the Crime Severity Index (CSI).  According to Statistics Canada, in 2025 the national CSI dropped by 5 percent while the CR declined by 2 percent.  In other words, both the number of crimes per 100,000 population (excluding traffic violations) fell as well as the seriousness of those crimes. Relative to their historic peak in the early 1990s, crime rates are still down dramatically though they are up from 2015 which marks the start of a reversal of the long-term downward trend. However, since 2023, both crime severity and crime rates appear to have declined.

Ontario reflects the national trends with crime severity in 2025 down 6 percent from the year previous (though still up 12 percent from 2015) and the crime rate down 4 percent from the previous year but up 20 percent from 2015.  The Ontario numbers vary when its major CMAs are examined with quite a few CMAs up while others are down.  However, the largest cities – Toronto and Ottawa – are both down and they of course affect the provincial totals dramatically given together they account for well over half of Ontario’s population.  As for northern Ontario CMAs – Greater Sudbury in 2025 saw a 2 percent decline in its CSI but a 3 percent increase in its crime rate while Thunder Bay saw a 3 percent increase in its CSI and an 18 percent rise in its crime rate – the largest increases across Canada’s 41 CMAs. However, Thunder Bay did not have the highest total crime rate in the country as that dubious distinction went to Chilliwack, B.C. (at 11,455 crimes per 100,000) while Thunder Bay was a bit further down the list in 6th place (after Kamloops, Red Deer, Nanaimo and Kelowna) at 8,373 crimes per 100,000.

Comparing Thunder Bay to the other major Ontario CMAs is done in Figure 1 and Thunder Bay definitely stands out when compared to other Ontario cities.  Thunder Bay is first at 8,374 crimes per 100,000 with Peterborough second at 5,386.  At the bottom are Toronto and Barrie at 3,950 and 3,777 respectively.  In terms of growth (Figure 2), about half of Ontario CMAs saw their crime rates decline and the other half saw an increase.  Thunder Bay is not only growing in terms of population, housing, construction and retail but also unfortunately with respect to crime.  Thunder Bay saw the largest increase at 18 percent followed by Brantford at 10 percent and then London at 7 percent.  Toronto and Windsor saw the largest declines at 5 percent and 10 percent respectively. 

 

 

A logical question is what policing resources are available to these Ontario cities to fight crime and Figure 3 presents police officers per 100,000 using data from Statistics Canada (TABLE 35100077).  Here it should be noted that the crime figures correspond to CMAs, whereas the police statistics are for municipal police services whose boundaries may not exactly correspond with the CMA boundaries. Nevertheless, the rankings proceed and here Thunder Bay is again at the top of the rankings of these Ontario municipal forces with 197 police officers per 100,000 in 2025. Next highest is Windsor at 172 followed by Toronto at 171.  At the bottom of the rankings are London, Ottawa and Kitchener-Waterloo-Cambridge (Waterloo Region Police) at 143, 135 and 118 officers per 100,000 respectively. Thunder Bay has the highest crime rate across major Ontario cities and it has the highest policing resources per capita.

 

However, Figure 4 looks at the policing resources in a somewhat different way.  It looks at the growth in police officers per 100,000 and does so between 2023 and 2025 (because Statistics Canada’s annual data does not have an entry for 2024). Here the numbers show that while the majority of Ontario municipal police forces saw growth in police officers per 100,000 – about one third did not.  Those showing a decline are Sudbury, Windsor, Kingston, Thunder Bay and Brantford. Of these five cities showing a decline in policing resources per capita, four also saw an increase in crime rates in 2025 with the exception being Windsor.

 

So, is there a relationship between policing resources and crime?  Simple correlations between police numbers and crime rates are probably not the best way to evaluate this type of relationship and a regression approach where confounding factors like demographics, community income and land area are considered are better.  Some might argue that wealthier communities with better socio-economic conditions can both afford more police as well as have the determinants for lower crime rates.  Some might argue that more police simply means more crime gets reported and could paradoxically result in a positive relationship between crime rates and policing. Nevertheless, it can be done simply and Figures 5 and 6 are presented together because they show an interesting feature of the data when you plot the crime rate against the number of police officers.  

 

Figure 5 plots the crime rate per 100,000 for all the Ontario CMAs against the number the number of police officers per 100,000 and the correlation is positive when a linear trend is fitted. However, that trend is heavily influenced by one observation in the northeast corner of the chart which "pulls" the line upward.  That is Thunder Bay.  If you remove Thunder Bay and redraw the chart with linear trend (Figure 6) you get the more conventional result that more police officers per capita are correlated with lower crime rates.  Thunder Bay is what one can refer to as an “outlier”.  It is not like the others.

Of course, it might be that using levels is not the way to do such a comparison and what might be better is to plot the recent growth in the crime rate against the recent growth in police officers per 100,000.  This is done in Figure 7 and the result is (including Thunder Bay) more conventional and in line with the expectation that if the number of police officers per 100,000 population is growing, the crime rate should see lower growth rates or even declines. Thunder Bay in this chart is in the northwest quadrant with a decline in per capita police resources in 2025 and an increase in crime rates.

 

Still, Thunder Bay even if its recent policing resources per capita have declined, nevertheless has the most police officers per capita of the Ontario cities in this comparison.  Does this mean there is an efficiency or effectiveness problem? Again, one way to look at this is to take the statistics and compute the reported crimes per police officer.  Figure 8 does this and the ranking shows that Thunder Bay has the third highest reported crimes per police officer of these Ontario cities.  In other words, there are a lot of crimes being reported by the police.  If one wants to use crimes reported per police officer as a productivity or effectiveness measure, then the Thunder Bay Police Service is one of the most “productive or effective” in Ontario.  They are catching a lot of crime.

 

What does this mean for crime in Thunder Bay?  Why are crime rates in Thunder Bay so high despite having one of the largest police forces in per capita terms?  It is because Thunder Bay simply has a lot of crime and it is getting worse and overwhelming the resources available.  If one may hypothesize, Thunder Bay is indeed unique in some of the economic and social forces that have shaped its past and continue to shape its future.  It is located at the crossroads of the country which means it is a transport node not only for grain, potash and transport trucks but also for criminals and criminal activity. 

In terms of social elements, Thunder Bay is a community that has always had a frontier edge and that includes an element of independence that can often border on lawlessness.  While it is true that Canadian cities have all become a bit more lawless in the wake of the COVID pandemic, Thunder Bay seems further along the path when compared to even the GTA. Lawlessness progresses in degrees.  Not following parking bylaws for snow removal or walking your dog across other people’s lawns is the start and suggests a lack of concern for others and the public good.  Indulging in rolling stops at stop signs, speeding and then running a red light is the next step.   I have seen vehicles doing U-turns on the Thunder Bay expressway seemingly oblivious to other traffic.  Increased theft in stores is yet another progression and then there is the infiltration of Thunder Bay by increased numbers of drug dealers coming from Toronto due to it being both a captive and lucrative market in its own right as well as a gateway to northern reserves.  Then comes the litany of domestic abuse and household violence largely springing from drug and alcohol abuse which also consumes police resources.

The police in Thunder Bay are essentially being overwhelmed.  They are being asked to solve not only Thunder Bay’s crime and social problems – which are substantial in their own right - but to deal with a wider range of provincial and national crime trends due to Thunder Bay’s location as a transport crossroads. Do you want to see crime rates in Thunder Bay come down?  Additional resources from the O.P.P. and the R.C.M.P need to be deployed outside the city limits along the highways leading to the city as well as the airport, port and railyards.   Sniffer dogs going through luggage at the airport and a more visible police presence there is needed.  There should be a lot more “seat belt” checks and “speeding enforcements” on the 11/17 and Highway 61 corridors leading to the city as well as more transport truck “safety inspections.”

It is not just the resource available but how they are deployed and used.  Moreover, crime fighting requires cooperation across jurisdictions and better coordination of efforts between the assorted policing levels.  Thunder Bay’s crime rate can be reduced but given the national and regional spillovers of the problem both into and out of Thunder Bay, it is not just the responsibility of the Thunder Bay Police Service.  In some ways, Thunder Bay’s role as a transport choke point is both the source of its crime problems and can facilitate its potential solution. At least, that is what the numbers are telling me.

An "End" Game in the Trade War?

  

As Canada processes the new Trump tariff threat and considers its options, assuming the tariffs are actually implemented, one imagines that retaliatory measures will eventually be employed.  These can consist of either tariffs on American imports or export taxes on Canadian export goods in high demand by the American market.  What is interesting in the list of proposed American tariffs released yesterday is the 50 percent tariff on “Toilet or facial tissue stock, towel or napkin stock and similar paper used for household or sanitary purposes, in rolls or sheets not of cellulose wadding” imported from Canada. The United States is a very high per capita consumer of toilet paper using annually an average of 140 rolls or 12.7 kgs per person.  It seems odd that in the age of affordability, the American government would make such a vital commodity more expensive for the average American but then above average Americans have probably been corrupted by bidets and are oblivious to the sanitary expenses of their lower income citizens.

A tariff on toilet paper can of course lead to an immense amount to low brow humour especially in the wake of the current deluge of diarrhea plaguing the United States. It does lead to the question of how much leverage Canada might have over the United States when it comes to toilet paper.  According to statistics from the World Bank, in 2023 the United States imported 186,304,000 kgs of toilet paper of which Canada supplied 96,957,900. As Figure 1 illustrates, Canada is the largest supplier of toilet paper to the United States accounting for over half of its imports.  The next largest is Mexico at 18 percent followed by China (14 percent), Indonesia (8.3 percent) and Vietnam (4.1 percent) with the rest of the world accounting for just over three percent.  On the surface, it looks like Canada has an intestinal stranglehold that it could play to its advantage.

 

However, this analysis is misleading because while Canada accounts for over 50 percent of U.S. toilet paper imports, imported toilet paper accounts for anywhere between 5 and 10 percent of American toilet paper consumption.  In other worlds, any leverage from being such an important supplier is lost in the sheer size of total American consumption most of which is domestically supplied.  Given that Canada supplies at best a few percent of total U.S. toilet paper consumption, a more expensive Canadian product either via tariffs or export taxes will be replaced either with more domestic production or cheaper imports. 

Retaliating via an export tax or export ban on toilet paper to the United States is at best a tongue in cheek approach to resolving our trade disputes with the United States.  However, the toilet paper case is an important illustration of the dilemma that Canada faces when it comes to retaliation.  While we are the largest foreign supplier of many imported goods for the Americans, our share of their total market consumption is often so small as to be negligible which of course reduces our leverage.  There are only a handful of commodities whereby Canada has a noticeably significant share of the American market, and these are mainly resource products such as oil, natural gas and potash.

For example, about 60 percent of American crude oil is produced domestically with the remainder imported and of that imported share, Canada accounts for nearly two-thirds.  In other words, the United States relies on Canada for 20 to 25 percent of its oil.  The United States also relies on 85 to 90 percent of its potash supply from Canada which is a critical input into American food production.  Export taxes on these commodities would indeed get noticed in the United States but one wonders if even that will have any effect on decisions made by the Trump administration. After all, the United States gets over 50 percent of its aluminum from Canada and yet they have still put heavy tariffs on its import.

In terms of the end game here, should the Americans continue on their current path of tariffs, there are two alternatives. Canada could accept whatever terms the Americans want given our export dependence and lack of diversification which, based on their current position seems to be a deal that includes tariffs, will lead us to losing employment in many value added industries.  Or, we can respond with our own broad based tariffs on our imports of U.S. value added products which will raise costs to Canadian consumers but preserve a larger share of our non-resource based industries. Neither is an attractive economic option, and the deciding factor will be which alternative is most acceptable to the Canadian public.  In the interim, we wait to see if they actually follow through with the tariffs.

The Road(s) Ahead

  

The United States under President Trump has taken yet another jab at Canada’s economy with the announcement of new 50 percent tariffs on range of goods.  This is a negotiating tactic, designed to extract leverage in the upcoming negotiations but the move also sends important messages about the ultimate aims of the United States with respect to its relationship with Canada that we ignore at our peril.

If implemented, given that oil, gas, potash, fish and critical minerals are exempted, these tariffs will have little to no effect on Canada's resource sector and exports - which are about 40 percent of our exports to the USA. The duties are actually narrowly targeted at manufactured and consumer goods such as chemicals, plastics, electronics, alcohol, dairy and hockey sticks of all things.  These are actually all together a relatively small portion of our exports to the United States. Auto parts - a crucial part of the integrated supply chain are also exempt – for the time being.

So, the overall impact on the macroeconomy would be relatively small but those specific targeted products would be relatively hard hit.  Alberta and Saskatchewan are the least impacted. Ontario and Quebec are more heavily impacted.  More importantly, these new tariffs are a violation of CUSMA and raise the question as to whether the United States can be relied upon to adhere to any deal even if struck entirely on their terms. Moreover, it is clear that the American version of a new Canada-U.S. trade agreement is not going to be what we are looking for.

The American negotiating vision is for deals with Canada and Mexico that emphasize their roles as input providers to the U.S. economy and value-added chains of production rather than trade partners and on terms always favouring the United States. In the case of Canada, our role in the American input chain is oil and gas (provided to them at a discount), as well as potash, critical minerals and any other resource product they require but that makes room for their producers first, such as lumber. 

Despite the mutual gains from trade, they see our value added manufactured and consumer products as direct competition to American manufacturers given the similarity of the high-wage employment generated.   Despite our ongoing attempts at trade diversification, our current dependency on the United States market for three quarters of our trade reduces our bargaining power. 

In the case of Mexico, the American preference is also mainly for their resource products such as petroleum, minerals, and food and agricultural products but they will tolerate manufactured products such as electronics and medical devices and even auto parts made with cheaper Mexican labour  - that of course stays on their side of the border.  Canadian labour does not provide the American consumer market with cheap manufactured goods and so we are out of luck there.

It is unlikely that CUSMA is going to be renewed in its current form, and any future trade arrangement will see tariffs on Canadian goods that are both negotiated as well as imposed unilaterally on spur of the moment. The Americans seem to want the deal that they last got in 1854 under the Reciprocity Treaty whereby there was free trade in resource products and raw materials but continued tariffs on manufactured products – on both sides one should add. Oddly enough, the Americans ended that deal for an assortment of reasons including lobbying by American resource producers in what was then a more resource intensive United States, American perceptions that Canada benefitted more from the deal than they did (sometimes it seems nothing changes) and Britain’s tolerance for the Confederate side in the Civil War.  Canadian merchants advocated joining the United States if they did not get a trade deal in 1854 but once it ended, Confederation and creation of an east-west economy behind a substantial tariff wall followed.

So, what are our options? Well, one option is simply to throw in the towel and give the Americans everything they want on their terms and hope that ends it and we get on with our lives. Of course, the resulting impact on the Canadian economy would be a return to a more resource intensive economy in terms of our exports and the loss of some employment in value added manufacturing and consumer goods production. Our auto sector would be smaller but after adjustment more competitive as would a lot of other small business manufacturers.  Alberta, Saskatchewan and to a lesser extent the Atlantic region would be relatively unscathed. On the other hand, the remaining provinces would be hit hard.

Of course, that outcome qualitatively does not seem much different from a world where the Americans levy tariffs on all our non-resource exports to the United States and we levy tariffs on all of our non-resource imports from the United States.  Oddly enough, this almost sounds like an updated version of the 1854 Reciprocity Treaty which in the end was abrogated by the Americans because they thought we derived greater benefits from it.  Yet, President Trump does appear to be a 19^th century thinker when it comes to trade and tariffs so maybe this is where we should go. Free trade in natural resource and agricultural products but tariffs of our choice on everything else would as in the 19^th century protect smaller and less efficient Canadian producers – extensive as opposed to intensive economic growth.

The best outcome is one without tariffs and free trade between Canada and the United States and Mexico whose economies have a lot of complementarities and stand to gain substantially from freer trade.  Alas, for that to happen it takes two willing partners to tango, and the Americans currently prefer not a tango or a pas de trois but more of a freestyle solo dance performance.  If the Canadian economy was able to generate income and employment under a tariff regime when it was a small and dispersed market of 8 million people, surely it will survive a tariff trade world when it has a market of 40 million people.  Will we have to get by with less?  Sure. But, as a country, our declining productivity means that we have been getting by with less for a long time now.  If it is any satisfaction, the Americans will also be poorer with tariffs.

 

Aging Populations and Rising Health Spending: It’s More Complicated Than You Think

  

Rising health expenditure and aging populations are linked in policy discussions of health spending. With the health expenditure to GDP ratio in Canada now up to 12.7 percent and per capita health care costs rising with age, the conventional wisdom is that the sustainability of provincial government health care systems is under threat from a grey tsunami as the last few cohorts of the baby boom generation turn 65.  While aging is a key factor in rising health care costs, it only accounts for about half of the increase over time with factors such as wage/cost inflation and rising utilization rates being other important factors in the growth.  More importantly, when it comes to aging, it is a little observed fact that per capita health expenditures in the over 75 age categories have been seeing moderation and declines.

Figure 1 plots real per capita provincial/territorial government health spending by age for three years – 1998, 2011 and 2023 using data from the CIHI National Health Expenditures.  As is expected, expenditures are approximately u-shaped with a decline up to the 1-4 age categories, relatively flat profiles until the mid to late 40s and increases that accelerate after age 65.  In 2023, the most recent year available, provincial-territorial governments spent $19,875 per capita (in 2025 dollars) for those aged less than one year which then dropped to $2,377 by the age 10-14 category. This rises very slowly to reach $3,651 by the age 40-44 category and then rises to reach $10,079 in the age 65-69 category and hits $32,483 for the 85-89 age category. This fits into the conventional view that health care costs rise with age and therefore aging populations will create a sustainability challenge for provincial government health systems.

 

 

However, if one looks more closely at the diagram, one can see that the orange line for 2011 is always above the blue line for 1998. This is to be expected.  As populations age, the health spending age profile rises with age but over time cost factors are also shifting the relationship upwards.  However, when one compares 2023 with 2011, note that there are segments of the green 2023 line that are below the 1998 line – namely in the late 20s and early 30s and in the 80 to 89 age categories.  That is between 2011 and 2023, real per capita provincial government health spending declined in these age categories.

 

 

Figure 2 looks at the percent change in real per capita provincial government health spending from 1998 to 2011 and 2011 to 2023.  Except for the <1 age category, growth rates declined in all age categories over time and sometimes by quite a bit.  For example, between 1998 and 2011, real per capita provincial/territorial government health spending grew by 46 percent for those aged 35-39 but from 2011 to 2023 it only grew 8.9 percent.  However, over the same two periods, for those aged 25-29, and 30-34, real per capita expenditure growth went from 33.3 percent to -4.5 percent and 41.9 percent to -5.5 percent respectively.  Even more interesting, for those aged 75-79, the respective growth rates were 26.7 percent for 1998 to 2011 and 1.4 percent from 2011 to 2023.  However, for those aged 80-84, the growth rate went from 24.1 percent to -2.9 percent and for 85–89-year-olds from 11.3 to -4.6 percent.

Despite the talk of unsustainable health spending, the growth rates in health spending have fallen dramatically over time and for some age categories there have been declines.  What is of more interest is why there are drops in real per capita spending for the 25-34 age groups and the 80 to 89 groups?  Are these demographic groups becoming more healthy over time and require fewer health services?  Have provincial government restraint measures been borne disproportionately by these age groups? Is the falling birth rate the reason meaning that there are fewer women of child bearing age facing complications from birth a factor in the 25-34 age group decline?  Is the onset of Medically Assisted Death (MAID) in Canada in 2016 a factor in the decline for 80–90-year-olds? Or is there simply a problem accessing primary care that is more prevalent in these age groups?

These are all important questions.  While seeing per capita health spending fall and generating potential sustainability improvements for provincial health systems are welcome, it is important to know the reasons why this is happening.

The Grand Plan Unfolds...Slowly

  

The road ahead for Canada became better delineated this week with the announcement that the winning proposal to build Canada’s new submarine fleet was the German Norwegian TKMS bid which beat out the South Korean Hanwha proposal.  While the ultimate deal still must be finalized and Hanwha is the reserve bidder, in the world of defence contracts, being the reserve winner is not much of a consolation prize. In the end, the NATO relationship with Germany and Norway seemed to be the deciding factor even with the many industrial benefits both bids promised.  And in terms of regional effects, the TKMS bid will have major economic impacts on Nova Scotia (Halifax) and there are a small number of deals proposed with companies in British Columbia, Mississauga, Montréal and Trois-Rivières.Unfortunately, there will be no steel contract for Algoma in Sault Ste. Marie.

In my earlier thoughts on the plans to evolve Canada’s economy and international relationships, I ventured that Canada had come to a fork in the road: the path of continued integration with the United States versus establishing an east-west trade flow through Canada linking Europe with the Asia Pacific.  Canada’s defence policy purchases are part of this economic policy with the fighter jet project offering a choice between Europe and America and the submarine contract offering a choice between Asia-Pacific and Europe. I also ventured that for the time being, Canada was essentially dangling the prospects of both but needed to make some choices.  The choices are being made but the process is unfolding very slowly.

In terms of economic and political diversification with Europe and Asia, while Canada will continue to pursue opportunities with the Asia-Pacific, it is with Europe that Canada will increasingly try to link with both economically and with respect to defence and security especially when it comes to the Arctic.  In a sense, the Innisian line that the civilization of Canada settlement is essentially the civilization of Europe still holds and we look towards the Atlantic more than the Pacific.  Despite this, participating in Eurovision is not quite the same as being a member of the EU.  One hopes that despite not acquiring the Hanwha submarines, Canada will still make important defence purchases in South Korea and Japan if it is to be serious about having an east-west global economic vision.

However, going with the TKMS bid also means that the likelihood has grown that Canada will likely not go with the Swedish Gripen jets.  In the end, even if we maintain the current volume of trade with the United States and grow trade with all our other partners, the United States will still be our dominant trade partner for decades to come.  Given that we share the North American continent with them, we will also need to maintain defence and security arrangements with them which means the 88-plane F-35 purchases is a done deal.  It is only a matter of an official announcement.  The only question is whether we will go with a dual fleet and order additional planes from Sweden.  After all, in the early 1980s, Canada deployed nearly 140 fighter jets and there is room to do both.  In the world of federal deficit financing, what's a few more billion dollars?

Continuing the F-35 purchases also has its political dimension.  We are going to be hammering out the details of a new trade arrangement with the United States, and it is unlikely we will back out of the jet purchases and risk incurring additional Trumpian wrath.  We are also likely to give in on several other fronts including aspects of our supply management, digital services and increased North American content in manufacturing with integrated supply chains (auto production). And we will likely still face tariffs at some base level because that is the current state of U.S. trade policy and our relationship with them is not that special.  Not that it ever was really.  It has always been America first but previous administrations were more diplomatic regarding our junior status whereas the current one is simply more up front.

Of course, the Americans apparently seem keen on a “Fortress North America” approach but such an approach seems at odds with the east-west trade diversification strategy that we are demonstrating we are pursuing.  It also will likely lock us into a relationship where the U.S. will have preferential access to our natural resources limiting our ability to realize their maximum economic potential.  While we may think we are negotiating Fortress North America, the other side will interpret it as Fortress America. So, the key question is can we negotiate the best deal possible without locking ourselves into an even tighter economic straitjacket while we wait for growth in non-U.S. trade to gradually reduce our economic dependence of the United States? 

 

Thunder Bay Leading in April Building Permits Data

 Yesterday, Statistics Canada released its building permits data for April 2026 and the ranked April 2025 to April 2026 growth rates reveal that Thunder Bay led the country's CMAs in growth in the value of total building permit values issued in April. Building permit values are an indicator of new investment both in terms of residential as well as non-residential construction (commercial, institutional). Canada as a whole saw a 7.6 percent decrease in the value of permits issued for the month of April - not exactly a good sign for a country that needs to up its investment game not to mention boost residential housing stock.  The total for all CMAs was down 1.7 percent. 

Figure 1 plots the percent change in the seasonally adjusted total value of permits issued between April 2025 and April 2026 for Canada's CMAs ranked from highest to lowest. At the top is Thunder Bay which going from $6.4 million to $25.6 million in value of permits issued had a 300 percent growth rate.  It was followed by Peterborough, ON at 195 percent and then Brantford, ON at 87.3 percent.  Of 43 CMAs, 16 saw an increase in the total value of permits while the remainder saw a decline with the steepest declines in Hamilton, ON and Red Deer, AB at 59 and 80 percent respectively.  The other northern Ontario CMA also saw a decline at 48 percent.  Essentially, two thirds of Canada's CMAs saw a drop in the total value of permits issued while one third saw an increase. Keep in mind that this is just a monthly performance and preliminary at that. 

 

 

As well, these are total permit activity values and what is often of more interest given the high rents and housing affordability in general is what kind of growth has there been in residential housing.  This is a different data series ( Statistics Canada Table 34-10-0293-01) and a look at the numbers paints a somewhat different picture.  

 

Figure 2 shows the ranked percent change in the annual value of total residential construction between 2024 and 2025.  At the top at 69 and 47 percent respectively are Brantford and Quebec City.  About 80 percent of CMAs saw growth in the value of residential construction between 2024 and 2025 which bodes well for supply side fixes to housing affordability in those cities.  Keep in mind that this is total value rather than the number of units which means that even those cities that saw a decline may actually be building more units per capita than cities with an increase in total value of residential construction given differences in building costs and prices. In Figure 2, Thunder Bay is near the bottom with a decline of 2.6 percent while Peterborough is last a -24 percent.  However, one cannot really reach a firm conclusion as to what is going on given the comparison is between somewhat different variables as well as of annualized monthly data with annual totals. 

Overall, still quite interesting numbers.   

 

 

When it Comes to Rent Increases, Where You Live Matters

  

Statistics Canada recently published new experimental quarterly estimates for rents form Canadian CMAs. The rent for a two-bedroom apartment as well as the annualized quarterly change was provided.  What made the news was that according to a composite measure for all CMAs “the average asking rent for a two-bedroom apartment was $2,150 in the first quarter of 2026, down 0.9% from the first quarter of 2025, when the figure was $2,170.”   Naturally, many would interpret this as rent becoming more affordable in Canada.

Indeed, “… average asking rent for two-bedroom apartments decreased in most major Canadian metropolitan areas. In the first quarter of 2026, asking rent averaged $2,660 in Toronto (-1.1%), $1,900 in Montréal (-1.6%), $3,100 in Vancouver (-2.2%) and $2,350 in Ottawa–Gatineau (Ontario part) (-5.6%). CMAs in the Prairies saw smaller declines in average asking rent, with Calgary standing at $1,900 (-1.0%) and Edmonton at $1,580 (-0.6%). In contrast, Halifax recorded growth in average asking rent, reaching $2,350, a 5.4% increase compared with the same quarter in 2025.”

While much was made of the rent decline it turns out that only about 60 percent of the CMAs saw their average rents decline between 1stQ2025 and 1stQ2026 ranging from the biggest drop at -5.9 percent for Kingston to -0.5 percent for St. Catherines.  The others were all non-negative ranging from 0 for Sherbrooke, Belleville-Quinte West and Peterborough to 9.4 percent for Saskatoon. (See figure) 

It should be noted that for those of you in northern Ontario, Thunder Bay saw an increase of 5 percent while Greater Sudbury saw an increase of 7.7 percent – the second highest rent increase nationally. Except for Winnipeg, which saw a 3.9 percent increase, the remainder of what can be termed Canada’s top ten CMAs all saw year over year declines in rents.  However, in Canada’s biggest cities, the declines were modest with Toronto declining 1.1 percent, Montreal 1.6 percent and Vancouver 2.2 percent.

However, with the average rent nationally for a two-bedroom at $2,150, affordability in Canada’s housing market is still some ways off. 

Canada's Wheel of History

“So in the Libyan fable it is told That once an eagle, stricken with a dart, Said, when he saw the fashion of the shaft, ‘With our own feathers, not by others’ hands, Are we now smitten.”

― Aeschylus

 

The merger of the Northwest Company of Montreal (NWC) and the Hudson Bay Company (HBC) in 1821 led to the complete absorption and end of the Montreal based fur trade.  The negotiations in London ultimately pitted the western based partners of the NWC against the eastern based Montreal agents who were apparently unaware the other was negotiating with the HBC.  In the end, the HBC negotiators were able to extract better terms as a result of the lack of unity amongst the NWC shareholders.  The tension between the western based Wintering Partners in the fur resource hinterlands and the capital raising Montreal Agents eventually proved to be the Achilles heel of the NWC. 

As noted by Harold Adams Innis, the NWC, whose operations stretched from east to west along the waterways of the Canadian Shield, was essentially the forerunner of the Canadian federation.  The east-west tensions of the fur trade have also been replicated within Confederation with the western resource-based provinces in particular tugging against capital intensive central provinces of Ontario and Quebec.  While history does not repeat, itself, the similarity of circumstances and economic forces does lead to what can best be termed repetitive patterns of issues. In the case of western Canada, much of the tension is rooted in historical grievance given that unlike Ontario and Quebec, the west did not get control of its natural resources from the federal government until 1930.  Moreover, federal resource and energy policy – in particular the National Energy Program of the early 1980s – was seen as directly counter to the economic and business interests of energy producing western provinces.

Which brings us to the present day and the current desire by some Albertans to separate from Canada.  Despite a federal government that appears quite sympathetic to Alberta’s current energy interests, Alberta is embarking on a referendum to decide whether to hold a referendum on separating from Canada. It appears that Canada will again be consumed with fate of the nation debates, dilemmas and brinksmanship.  And, depending on what happens this fall in Quebec, there is the distinct possibility that the Parti Quebecois will form the government with the prospects of yet another sovereignty referendum in that province.  Needless to say, there will again be a market for assorted Captain Canadas to come to the rescue.  When not railing against Ottawa, there is nothing Canada’s Premiers like better than embarking on heroic cross Canada tours professing their love for the country.   After all, what better way to divert constituents from their provincial problems than by their dashing Premier helping to save the country.

Canada has always been one of the most fortunate and blessed of countries possessing abundant resources, oceans on three sides to shield us from adversaries and despite recent frictions, a largely benign southern neighbour that served as an economic partner and yet was generally oblivious of our presence.  Canada developed a high material standard of living and by the measures of a dangerous world, a rather open and unique approach to international relations that allowed us to underspend on national security while moralizing and lecturing others without worry as to the consequences. We became a nation of happy Hobbits, dancing away the long summer days and celebrating our good fortune while ignoring the dark Mordorian clouds swirling about.

Taking Canada’s blessed situation for granted afforded us the luxury of consuming ourselves with questions of national existence.  It also created situations that by world standards, were somewhat comedic.  After all, what other country could have pulled off the self-absorbed 1990s drama of having a separatist as the Leader of Her Majesty’s Loyal Opposition?  On the one hand, that Canada could undergo such tensions and stresses and remain a bastion of civil order and discourse, is an achievement in itself.  On the other hand, how many times can a country continually come to the brink and then retreat?

It is now Alberta’s moment in the sovereignty sun and its Premier in typically Canadian fashion has decided that it will be a referendum if necessary but not necessarily a referendum.    The Premier of Alberta is not a separatist and notwithstanding legitimate concerns regarding equalization, resource management and energy policy, neither are the vast majority of Alberta’s people. However, the Alberta Premier is a politician and is forced to balance diverse interests and constituencies with a referendum stand that in the end will likely satisfy no one.  However, wielding the separatism spectre might be a convenient cudgel in making sure Alberta’s energy sector is in no way compromised in the upcoming CUSMA negotiations and that the federal government does not retreat from its advocacy for new pipelines.  It is however a dangerous game.  When you light a fire, you do not always get a controlled burn.

Of course, there are some Albertans who would be happy to leave the most successful federation in modern history for a future as a landlocked country joining the ranks of Kyrgyzstan, Ethiopia and Uzbekistan. To be fair, these same Albertans probably see their future more as a unitary energy powered Switzerland or Austria.  Interestingly enough, these very successful countries are actually federations rather than unitary states and also not dependent on boom bust energy products for twenty percent of GDP and government revenues, as well as seventy percent of exports.  While Alberta has the highest per capita GDP in Canada and is riding a wave of prosperity, it risks creating investment uncertainty for itself and the rest of the country.  As economist Trevor Tombe has noted, a separate Alberta would be a poorer Alberta.  It is likely not a coincidence that never-ending threats of separation and referendums in Quebec until the 1990s were correlated with the stagnation of Montreal’s economy and the growth of Toronto’s.

Yet here we are.  This new wave of national torsion will come at a time not only of growing international political and economic uncertainty, but in the midst of what will likely be a most acrimonious and hardball renegotiation of our trading relationship with the United States.  Needless to say, Canada is the most self-indulgent of countries if it believes that internal divisions will not affect its role in the world and will not be taken advantage of by adversaries.  In the end, if we are unable to make our way in the world via improved trade arrangements and investment because of continued unfortunate distractions generating political and economic uncertainty, we will have no one but ourselves to blame.

 

 

 

 

The Fork in the Road

  

“Two roads diverged in a wood, and I—

I took the one less traveled by,

And that has made all the difference.”

Robert Frost

 

As our glacial spring morphs into summer like weather, we are also approaching a crossroads of sorts, a fork in the road if you wish. Over the last year, Canada’s government has been navigating a somewhat delicate road between its vital economic relationships with a volatile and more aggressive United States and attempts to diversify our trade and security relationships with like minded middle powers.  At some point, most likely this summer, Canada will need to make some decisions that will require commitments. Moreover, despite the attractions of poetry, automatically taking the road less travelled may not necessarily be the best option as it could make a difference not compatible with our best long term economic interests. Yet, the more travelled road comes with its own challenges.

We are poised at the junction of two roads.  First, there is the continuation our North American trade zone as currently embodied in the Canada-US-Mexico (CUSMA) trade arrangement with new emphasis on our trade with Mexico.  This arrangement has been under siege of late with higher tariffs levied on our auto production, steel, aluminum and forest products.  Yet about 90 percent of our exports still flow tariff free into the United States and our economy has been surprisingly resilient over the last year. This economic arrangement is the result of over a half century of North American economic integration and has benefitted Canadian energy producers, manufacturers and business in general.  Despite the pronouncements of President Trump, it has also been of great benefit to the United States in terms of providing a market for its manufacturers, raw materials for its industries, and a secure fossil fuel energy source that is sold to them at a discount of between $10 and $20 a barrel known as the WCS-WTI differential. Indeed, Canada accounts for about half of the crude oil imported by the United States but it then re-exports some of it at the world price yielding a windfall to the US of nearly $20 billion annually.

The other approach is what can best be described as a New National Policy driven by the change and disruption in the US led world economic and security order.  Essentially, in this approach, Canada will pursue trade and export opportunities with Europe and Asia for its goods and resources to build an east-west flow to complement the north south flows of CUSMA.  This will be accompanied by investment in defence production and security arrangements with like-minded partners in Asia and Europe.  In essence, Canada and its Arctic become a Zone of Transit for these east-west global flows.  To some extent, the marathon trade and marketing trips undertaken by the Prime Minister to bring this about have been bearing some fruit.  For example, our investment drought has taken a turn for the better with foreign direct investment in Canada hitting a $93 billion high. However, nearly half of that has come from mergers and acquisitions rather than the financing of new productive activity. While such a successful metric may befit the efforts of an investment banker Prime Minister, it remains that investment in productive capital rather than asset ownership rearrangement is what is needed to improve Canada’s poor real per capita GDP growth performance.

Of course, which road we will take is uncertain.  On the one hand, Canada still relies on the United States for nearly three quarters of its export market and even without CUSMA, the fact is that the United States is a natural trade partner given we share the continent with them and the north south physiography of North America favours trade with the United States.  As well, despite our pronounced flirtation with the EU and even hints of membership, realistically, that will require a level of political and regulatory integration of social and economic policies that will be blocked first and foremost by Canada’s provinces who after 150 years of Confederation have yet to address inter provincial trade barriers.  At best what we are looking at is perhaps an  “Associate EU Membership” that will boost trade, investment and defence but even there the reality remains that all the members of the EU have yet to approve full implementation of the Canada-EU free trade agreement reached in 2017.

Prime Minister Carney is of course aware of these challenges which is why it appears he is hedging his bets.  On the one hand, he travels the globe making deals and dangling the prospect of Canadian military purchases of Korean submarines and Swedish fighter jets while maintaining that Canada must seek non-US trade partners.  On the other, he remains open to deeper integration with the United States in some sectors with the likelihood that current arrangements in energy and auto manufacturing are what he wishes to continue.  Of course, there was a time when some type of deeper common market arrangement with the United States with common external trade policies might have been the next step to deeper North American integration, but the actions and antics of the Trump administration have nixed that path with the Canadian public for the next fifty years. The point worth considering is that despite greater integration and a larger effective market, over the last few decades, our productivity has declined rather than grown with such advantageous access to the US market.

Ultimately, what Prime minister Carney seems to be signalling is that at this fork in the road, Canada will be travelling down both roads at once.  It will pursue greater integration with the United States, if necessary, along the lines of the existing relationships in energy, steel and auto manufacturing but it will likely not expand or create new ones in either those areas or even other areas.  At the same time, Canada will seek to expand trade with Europe and Asia especially with regards to energy and resource developments though even here, to put our money where our mouth is, we will need to build new pipeline and transport capacity.  Moreover, we will need to offer some tangible evidence we are serious about diversifying away from the United States such as buying Swedish fighter jets or Korean or German submarines.  Needless to say, the Americans will likely not take kindly to such impertinence given that their approach to trade with Canada seems to be “what is ours is ours and what is yours is negotiable”. How dare we spurn their wares.

Still, here we are and by summer’s end we are likely to get some answers as to whether or not Prime Minister Carney’s strategy is working. Stay tuned.

 

 

Explaining Canadian Gas Prices

  

Since the start of the U.S.- Iran war and the blocking of the Strait of Hormuz, gasoline and fuel prices around the world have soared.  As of yesterday, the daily national average gasoline price in Canada according to CAA was 184.8 cents per litre though of course it varies across the country.  For example, in Thunder Bay this weekend, it hit 203 cents per litre.  Reasons for variation in Canadian pump prices at least according to the CAA include seasonal changes, weather conditions, increased demand, geopolitical conflict, status of oil and gas reserves, refining capacity, and the value of the US dollar given crude prices are in USD.

Of course, despite having substantial supplies of domestic oil, in the end, Canada’s gasoline prices at the pumps are tied to the international price of oil and so what better comparison is there than looking at Canadian gasoline pump prices relative to the international price of a barrel of oil as measured the price of West Texas Intermediate Crude (WTI). For the period January 1990 to April 2026, Figure 1 plots the monthly 18 city average of Canadian self-serve unleaded regular gasoline prices in cents per litre calculated from Statistics Canada (Table: 18-10-0001-01 (formerly CANSIM 326-0009)) alongside the monthly price in USD of Cushing, OK WTI Spot Price FOB taken from the U.S. Energy Information Administration.

 

 

The two series certainly seem to move together.  However, simply eyeballing the movement does not really tell us how sensitive the Canadian price at the pump is to the international price of crude.  For that, linear regression is a better tool.  I took the log of the two series and then ran a very simple linear regression of Canadian gasoline prices on the WTI price.  For the period January 1990 to April 2026, there was an r-squared of 0.86 and a coefficient on the price of WTI of 0.54.  What this can be interpreted as given it was a log-log regression is that since 1990, a 1 percent increase in the price of a barrel of WTI in USD results in a 0.54 percent increase in the average 18 city price of Canadian regular unleaded gasoline at the pumps. 

Has this been a stable relationship over time?  Well, the data was broken up into two approximately equal time periods – January 1990 to December 2007 and January 2008 to April 2026 – and two more regressions were run.  The results were interesting as they suggest that the price of gasoline in Canada over time has become less sensitive to the international price of crude.  Moreover, the two periods separately are less sensitive to the price of WTI than when combined if one looks at the coefficients on WTI. For the pre 2008 period, the r-squared was 0.91 and the coefficient on WTI was 0.44 whereas for the post 2008 period the r-squared was 0.35 and the coefficient on WTI was 0.33.   

Essentially, the results seem to suggest that over time the price of Canadian gasoline at the pumps seems to have become less sensitive to fluctuations in the price of WTI with variations in the price of WTI explaining over 90 percent of the variation before 2008 and barely one third since.  What other factors might explain trends in Canadian gasoline prices?  Well, there is the list of variables provided by the CAA, alongside which one could perhaps also add any changes in fuel taxation by the federal and provincial governments over this period as well as the degree of competition in the Canadian retail gasoline market. Naturally, a fuller and more detailed analysis with more control of assorted confounding factors would be quite interesting.