Category Archives: Finance & Economics

The brewing tension between Canada and the US has escalated into a full‑blown trade war, disrupting cross‑border supply chains, driving up the cost of construction materials, and threatening to throw the timelines of major housing projects into disarray. …Developers already grappling with labour shortages, high interest rates, and soaring land costs, now face a destabilizing force that could impact every aspect of the construction process. …“The construction industry continues to build through uncertainty, but contractors are facing increasing pressures in getting the job done,” said Rodrigue Gilbert, President of the Canadian Construction Association. …Meanwhile, the US housing market is feeling the shock as well. …The long‑term implications of the trade war reach far beyond construction sites and border checkpoints, according to a report by the Canadian American Business Council by Oxford Economics. The analysis underscores the depth of Canada–US economic integration and how mutually beneficial that relationship has been for decades.

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The main risk in the current macro environment is a failed diplomatic resolution to the US-Iran conflict, as the crude oil market is running out of buffers. Indeed, it is remarkable that crude oil prices remains below $90 / barrel with neither the US nor Iran willing to lift their blockade of the Strait of Hormuz… Today’s chart shows how our structural model breaks down the relative contributions of the market and macro factors driving the 20% rise in oil prices since the start of the US-Iran war. Constrained trade flows, inventory drawdowns and market sentiment are the main sources of upward pressure on crude oil prices since March. So far, prices have been held back by a collapse in imports from China and high US commercial inventories. However, China ramped up purchases in July by 2.5 Mbbl/d, and exceptionally low US strategic reserves mean refineries have less of a buffer. Barring a diplomatic resolution, these factors mean that oil price risks tilt to the upside in the near-term, as the physical market is running out of offsets.

Elevated borrowing costs, rising inflation and broad economic uncertainty continue to curb buyer demand and hold back new home sales. Sales of newly built single-family homes declined 10.5% in July to a seasonally adjusted annual rate of 607,000, following a sharply upwardly revised June estimate, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales was 6.3% lower than a year earlier per the July data. The July sales pace was the slowest since January of this year. Mortgage rates increased from 6.1% to above 6.6% from January to July. …New single-family home inventory in July rose to 488,000 units, up 1.9% from June, and down 1.6% compared to a year ago. This represents an elevated 9.6 months’ supply at the current building pace, the highest measure since January.

After three consecutive quarters of modest improvement, housing affordability worsened in the second quarter as higher mortgage rates, rising construction costs and economic uncertainty weighed on the market, according to the latest data from the NAHB/Wells Fargo Cost of Housing Index (CHI). The CHI results from the second quarter of 2026 show that a family earning the nation’s median income of $106,800 needed 34% of its income to cover the mortgage payment on a median-priced new home. …The percentage of a family’s income needed to purchase a new home rose from 32% in the first quarter of 2026 to 34% in the second quarter, driven by a more than 30-basis point rise in the average mortgage rate and a 2% increase in the median price of a new home. 

With overall single-family construction down almost 7% for the first seven months of 2026, custom home building has been a relative bright spot for the residential construction industry. The custom building market is less sensitive to the interest rate cycle than other forms of home building but is more sensitive to changes in household wealth and stock prices. With spec home building down and the stock market up, custom building has expanded its market share in recent years. However, that expansion stalled somewhat during the second quarter. According to NAHB’s analysis of Census data… there were 49,000 total custom building starts during the second quarter of 2026. This was 9% lower than the second quarter of 2025, which itself set a three-year high for quarterly construction volume. For the last four quarters, custom single-family housing starts totaled 183,000 homes, effectively flat compared to the prior four quarter period (184,000).

US housing starts fell in July as economic uncertainty, rising construction costs, labor shortages and elevated financing expenses continued to challenge builders. Overall housing starts decreased 12.4% in July to a seasonally adjusted annual rate of 1.24 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. …Within this overall number, single-family starts decreased 9.9% to an 808,000 seasonally adjusted annual rate and are down 15.7% compared to July 2025. The multifamily sector, which includes apartment buildings and condos, decreased 16.8% to an annualized 431,000 pace and are down 8.9% compared to July 2025. “Builders continue to face significant challenges from elevated construction costs and affordability pressures,” said Bill Owens, NAHB chairman. …“The July decline in housing starts reflects broader weakness in the housing market,” said NAHB’s assistant VP for forecasting and analysis. “Builders remain cautious as elevated mortgage rates, rising construction costs and economic uncertainty continue to limit demand. 

US Builder sentiment remains muted from economic and geopolitical uncertainty, elevated mortgage rates and rising construction costs. Builder confidence in the market for newly built single-family homes inched up one point to 35 in August, according to the NAHB/Wells Fargo Housing Market Index (HMI). August marked the 16th straight month… with the HMI below 40. Custom home builders continue to report stronger market conditions than spec builders, reflecting better conditions at the higher end of the market. …Rising gas and diesel prices are pushing up material costs, and spec home building remains weak as many prospective buyers stay on the sidelines. …The index measuring current sales conditions increased two points to 39, while the indexes for future sales expectations and prospective buyer traffic held steady at 43 and 23, respectively.

Consumer sentiment fell about 8% this August, ending two consecutive months of improvement. While views of personal finances saw only minor declines, expected business conditions sank 11% for the short run and 17% for the long run. Decreases in sentiment were seen across the political spectrum, with Republicans exhibiting the strongest month-to-month decline in August. Sentiment among Republicans is now 19% below readings just prior to the Iran conflict and the lowest since the 2024 election. Although the early-month weakening in sentiment was pervasive across various demographic groups, notably large reductions were seen among older consumers, lower-income consumers, and those without a college degree. These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation. Across all consumers, only 8% expect their income growth to exceed inflation in the year ahead, down from 18% in December 2024, a reflection of the belief that high prices will continue to be burdensome.

While North American softwood lumber consumption has declined in 2026, prices have remained surprisingly resilient due to constrained supply, reduced production, and persistent structural demand for housing despite ongoing affordability challenges. …On one hand, builders continue to face affordability concerns, elevated mortgage rates, and cautious consumers. On the other hand, lumber prices have generally strengthened throughout 2026, despite year-over-year declines in consumption. Here’s what the latest market indicators are telling us. …The U.S. housing market continues to balance between long-term demand for new homes and short-term economic pressures. …These trends suggest that, while housing demand hasn’t disappeared, the market is adapting to economic realities rather than expanding uniformly. …Although North American lumber consumption has declined year over year, production has also contracted. Reduced output across both the United States and Canada has helped keep supply relatively tight, supporting pricing across many lumber grades.

Led by declines in gasoline and diesel prices, inflation eased for the second consecutive month after reaching a three-year high in May. …Though easing inflation and a cooling labor market reduced pressure for Fed rate hikes, renewed tensions with Iran could keep inflation elevated in coming months, complicating the Fed’s path forward. On a non-seasonally adjusted basis, the Consumer Price Index (CPI) rose by 3.4% in July from a year ago, following a 3.5% increase last month, according to the BLS latest report. The “core” CPI, excluding the volatile food and energy components, increased by 2.5% over the past twelve months, following a 2.6% increase in June. The housing shelter index, which makes up a large portion of “core” CPI, rose 3.2% over the year, following a 3.3% increase last month. Meanwhile, the component index for food rose by 3.0%, and the energy component index increased by 14.7%.

Americans who act as their own builder put wood framing into 96 per cent of the houses they finished in 2025, up from 93 per cent a year earlier, in a segment where concrete held 2 per cent. That is according to the United States Census Bureau, whose Characteristics of New Housing file, published on 1 July, counts 1,005,000 single-family completions across the year compared with 1,019,000 in 2024. Owner-built houses are a slice of that market rather than the whole of it, and the framing share across every completed American house sits lower. The National Association of Home Builders put that wider figure at 94 per cent for 2024, the most recent year it has analysed, working from the same Census survey. Jing Fu, Director of Forecasting and Analysis at the National Association of Home Builders, counted 959,000 wood-framed single-family completions in 2024, 3 per cent more than the year before, with concrete taking 5 per cent of the market and steel under half a per cent.

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Yesterday, the US Department of Energy reported that crude oil stockpiles in the Special Petroleum Reserve (SPR) have fallen below 300 million barrels, equivalent to just over two weeks of supply. Today’s chart shows that since the closure of the Strait of Hormuz, the US and other IEA members have depleted some 280 million barrels of their reserves. Re-routing, SPR releases and weak demand (largely in China) have collectively absorbed most of the output loss from Hormuz. Absent these counterweights, the oil market would face a deficit of 17 million barrels a day. Instead, it faces a more manageable shortfall of 2.5 million barrels / day. …Many of these offsets are either exhausted or unsustainable. In this context, we find a 72% chance that Brent trades above current levels over the next three months. For oil to fall sustainably, a potential Iran-Oman agreement would have to last. 

The U.S. labor market weakened in July, with nonfarm payrolls down 23,000 and downward revisions cutting another 103,000 jobs from May and June. Although the unemployment rate edged lower to 4.1%, the decline reflected a smaller labor force rather than stronger hiring, as overall participation fell to its lowest level since early 2021. July marked the 7th monthly job loss over the last year and a half. Wage growth also cooled, with average hourly earnings rising 3.2% year-over-year in July to $37.62, down from 3.4% in June and the slowest pace of 2026. Despite the slowdown, wage gains continue to outpace inflation, consistent with productivity-supported real wage growth. …Employment in the overall construction sector rose by 22,000 jobs in July, following a gain of 5,000 in June. Within the industry, residential construction employment edged up by 2,100, its first monthly increase in four months, while non-residential construction added approximately 20,000 jobs.

After widespread sawmill curtailments and closures in 2025, alongside a significant reduction in imports from Canada and Europe, supply is aligning more closely with underlying demand. Sawmill operating rates have improved and prices have gradually recovered from the lows seen last year. Yet rebalancing has not made the market easier to navigate. Instead, buyers, sawmill operators and construction market participants face a new challenge: understanding how rising costs, housing weakness, trade policy and broader economic trends are influencing the market simultaneously. One of the most important distinctions in the current market is that stronger prices do not automatically mean stronger demand. The key implication: Markets can experience higher prices even when demand remains relatively subdued, particularly when supply has contracted faster than consumption. …Energy costs, housing affordability and AI-related infrastructure investment are creating new pressures across the wood products supply chain.

Re-escalation of the conflict in Iran pushed mortgage rates higher in July. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.54% in July, up 5 basis points (bps) over June. Since the conflict in the Middle East began, the 30-year mortgage rate has climbed by almost 50 bps. The average 15-year rate averaged 5.91% in July, up 9 bps from June, and up 48 basis points since the end of February. Compared to a year ago, the 30-year rate remains lower by 18 bps, however, the 15-year rate is now higher by 5 bps. The 10-year Treasury yield, a key benchmark for long-term borrowing, rose 10 bps to an average of 4.58% in July as renewed attacks in the Strait of Hormuz heightened concerns about energy supplies and inflation. The yield rose sharply, ending July at 4.67%, 23 bps above its June closing level.

Private residential construction spending declined 0.3% in June, while substantial downward revisions to improvement (remodeling) spending significantly altered the sector’s recent trajectory. …Although remodeling was the only residential category to increase in June, the gain was modest at 0.1%. When compared to a year ago, spending has declined 7.2%. …Revisions to single-family and multifamily construction spending were minor and did not alter the direction of their monthly movements. …The NAHB construction spending index illustrates how spending on single-family construction has slowed since early 2024, reflecting the impacts of elevated interest rates and ongoing uncertainty over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in June 2023, with the index largely plateauing since late 2024.

JPMorganChase today announced the firm intends to deploy over $750 billion through 2035 to increase housing supply and support homeownership in the United States. This marks a nearly 40% increase in the firm’s housing capital deployment compared to the past decade, and includes financing for 1,000,000 affordable housing units and helping 500,000 homebuyers purchase homes. This announcement is part of JPMorganChase’s American Dream Initiative. …As the nation’s largest multifamily lender and residential bank mortgage lender, JPMorganChase has a track record of expanding affordable housing supply and supporting homeownership, bringing the scale and expertise needed to help address the country’s housing challenges.

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Yesterday, the US Bureau of Economic Analysis reported that US GDP growth slowed to 1.5% on an annualized basis in Q2/2026, falling short of market expectations for a 2.1% gain. Almost all of the weakness stemmed from exceptionally strong imports, which subtracted 1.5 percentage points from the headline figure. However, private spending – our preferred measure of cyclical conditions, which makes up 85% of the economy and excludes volatile government spending and trade – accelerated to a 4% annualized rate in Q2, its strongest pace in three years. As today’s chart shows, IT capex continued to rise sequentially, consumer spending recovered from a sluggish Q1, and growth broadened to residential and other business investment following several soft quarters. The latest figures validate our thesis that the US economy is poised to accelerate in 2027. After a gain of 2% this year, our baseline scenario is for GDP growth to pick up to 2.3% in 2027.

Housing’s share of the economy was 15.8% in the second quarter of 2026, according to the latest estimates of GDP produced by the Bureau of Economic Analysis. This share is down from 15.9% in the first quarter and is at the lowest level since 2019. Residential construction, measured by residential fixed investment, rose for the first time in over a year, while households’ expenditure on housing services fell due to lower household consumption of utilities. The more cyclical home building and remodeling component–residential fixed investment (RFI)–was 3.7% of GDP, even with the previous quarter. The second component, housing services, was 12.1% of GDP, down from 12.2% in the previous quarter. The graph below plots the share for housing services and RFI, along with housing’s total share of nominal GDP.

Real gross domestic product (GDP) increased at an annual rate of 1.5%  in the second quarter of 2026, according to the advance estimate released by the U.S. Bureau of Economic Analysis (BEA). In the first quarter, real GDP increased 2.1 percent. The contributors to the increase in real GDP in the second quarter were increases in consumer spending, investment, and exports that were partly offset by a decrease in government spending. Imports, which are a subtraction in the calculation of GDP, increased. Compared to the first quarter, the deceleration in real GDP in the second quarter reflected a downturn in government spending and decelerations in investment and exports that were partly offset by an acceleration in consumer spending. Imports increased more in the second quarter than in the first quarter.

The Federal Reserve held the federal funds rate at a target range of 3.5% to 3.75% at the conclusion of its July policy meeting. There were three dissenting votes, all of which supported raising the federal funds rate by 25 basis points. The July monetary policy hold marked the fifth consecutive hold, following 75 basis points of cuts at the end of 2025. The central bank noted that “economic activity is expanding at a solid pace despite elevated uncertainty.” The Fed also stated that this uncertainty is due in part to the conflict in the Middle East. Additionally, Chairman Warsh noted that the economy has shown “impressive resilience” in the face of these headline risks. …With respect to inflation, the Fed stated that “inflation remains elevated” relative to the central bank’s two percent target. Importantly, the Fed attributed these inflation challenges to “supply shocks,” including the energy sector.

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The Conference Board’s Consumer Confidence Index fell 1.4 points to 90.8 in July. Consumers’ assessment of the present situation weakened for a third consecutive month, while expectations remained subdued. The labour market component also weakened as fewer respondents described jobs as plentiful, suggesting that job security is becoming a greater concern for households. This weakening extends beyond the latest confidence survey. The employment-to-population ratio has fallen sharply this year, while the share of consumers saying jobs are hard to get remains elevated relative to recent lows. This helps explain why the unemployment rate may understate labour market softness. Participation has declined due to discouraged workers abandoning their job search, and unemployed workers who remain in the labour force are taking longer to find new employment. Beyond a steady unemployment rate, weakness in other indicators all point to a labour market that is losing momentum. 

Cambridge, Massachusetts  – Annual spending on home improvements and repairs is expected to continue losing momentum through mid-2027, according to the latest Leading Indicator of Remodeling Activity (LIRA) from the Joint Center for Housing Studies of Harvard University. Year-over-year growth in renovation and repair spending is expected to slow to just 0.5 percent in the second quarter of 2027. “Growth in remodeling permitting and retail spending on building products have flattened recently, suggesting that renovation activity is cooling,” said Rachel Bogardus Drew, Director of the Remodeling Futures Program at the Center. “Our forecast suggests this will lead to a third straight quarter of decelerating year-over-year growth, with spending projected to be $519 billion through mid-2027.” “Reduced housing starts and broader economic uncertainty are also limiting stronger gains in remodeling spending,” said Chris Herbert. “Until home sales rebound from current low levels, remodeling expenditures are likely to stay at this pace.”

June inflation data provided some relief for consumers and the bond market. Headline inflation slowed from 4.2% to 3.5% and core inflation fell back to 2.6%. While still above the Fed’s target of 2%, the progress on inflation was a result of the Iran war ceasefire. However, renewed hostilities and the end of the ceasefire are placing upward pressure on oil prices. Rising energy costs are expected to push July inflation higher. Additional pressure will come from a renewed administration effort to establish tariffs. Inflation remaining in the 3% range likely eliminates any hope for an additional Federal Reserve rate cut for 2026. And some believe the new Warsh-led Fed may increase interest rates before the end of the year. Inflation is affecting building materials as well. Residential construction input prices were 6.2% higher than a year ago, including a 4.6% increase for building materials. Given this, 2026 will be the second consecutive year of declines for single-family home building.

The average long-term U.S. mortgage rate climbed this week to its highest level in nearly 12 months, pushing up borrowing costs for prospective homebuyers at a time when rising oil prices are already squeezing household budgets. The benchmark 30-year fixed rate mortgage rate rose to 6.58% from 6.55% last week, mortgage buyer Freddie Mac said Thursday. One year ago, the average rate was 6.74%. The rate has ticked higher three weeks in a row. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers’ purchasing power. As rates rise, that can lead prospective home shoppers to delay buying a home, one reason U.S. home sales have been sluggish this year. Borrowing costs on 15-year fixed-rate mortgages, often sought by borrowers refinancing a home loan, also rose this week. That average rate increased to 5.96% from 5.93% last week. A year ago, it was at 5.87%, Freddie Mac said.

Congress’ historic effort to boost the nation’s housing supply passed both chambers with overwhelming bipartisan support and became law earlier this month. It also left a mountain of paperwork for Washington’s significantly shrunken federal agencies, which are now tasked with turning dozens of new policies into reality. Some of the lawmakers who pushed for the law worry that the Department of Housing and Urban Development — which has shed more than 30% of its core policy workforce in just three years following budget cuts — is too understaffed to quickly issue new rules and implement its provisions, aimed at making building and buying homes cheaper and easier. HUD Secretary Scott Turner is “up to the task, but you’ve got to have the underlying organization to get it done,” Sen. Thom Tillis (R-N.C.) told reporters. …HUD’s budget estimates show the offices that run the department’s programs shed more than 1,800 staff since 2023.