The strength of the global economy came into the spotlight yesterday amid several critical economic announcements, in particular, those out of Europe, which gave some insight into how the economy is faring amid geopolitical tensions. The global economy has come under pressure as the closure of the Strait of Hormuz has raised oil prices, which, in turn, have lifted prices around the world. This is expected to have an impact on consumer and business spending, which could hinder global economic activity.

• A second estimate showed Europe’s economy expanding by 0.1% over the first quarter of 2026, which is the slowest pace of growth since the second quarter of 2025. Europe’s economy lost some momentum in March in response to higher oil prices and rising inflationary pressures.
• The pace of employment growth slowed. The number of employed persons in Europe rose by 0.1% in the first quarter, which was also the softest increase since the second quarter of last year. Concerns are mounting that higher inflation could hinder job growth.
• US President Donald Trump landed in China looking to settle trade differences with China and discuss China’s business relationship with Iran.
• Moderating trade tensions between the world’s two largest economies may help global trade activity pick up and ease uncertainty about the global economic outlook.
• Meanwhile, in the US, it was reported that producer prices moved sharply higher, by 1.4%, in April, which was their largest monthly increase since 2022.

Markets are hoping for positive developments from the trade summit between the world’s two largest economies. Trade and geopolitical tensions have had a significant impact on global economic activity throughout 2025 and now into 2026. As these tensions persist, the outlook for the global economy becomes shaky. These factors also weigh on Canada’s economic outlook.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.