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U.S. consumer spending increased slightly more than expected in August as households went on vacation and dined out, keeping the economy on solid ground as the third quarter progressed, while inflation continued to steadily pick up.

The report from the Commerce Department on Friday suggested the economy has so far retained most of its momentum from the April-June quarter. Signs of the economy’s resilience evident in other data this week showing low layoffs and strong demand by businesses for equipment would argue against the Federal Reserve cutting interest rates again this year.

U.S. reports stronger-than-expected second-quarter economic growth

But the hiring side of the labor market is struggling, with job growth almost stalling in the last three months amid a lingering drag from trade policy uncertainty as well as an immigration crackdown that has reduced the supply of workers.

“There is no support in this report for (Fed Governor) Stephen Miran’s suggestions that policy interest rates have to be cut right away, and by a lot,” said Carl Weinberg, chief economist at High Frequency Economics. “Indeed, there is no recommendation in these numbers for any easing of monetary conditions at all!”

Consumer spending, which accounts for more than two-thirds of economic activity, rose 0.6 per cent last month after an unrevised 0.5 per cent advance in July, the Commerce Department’s Bureau of Economic Analysis said. Economists polled by Reuters had forecast consumer spending increasing 0.5 per cent.

Spending was boosted by outlays on services like transportation, which includes airline travel. Consumers frequented restaurants and bars, and also stayed at hotels and motels. They also boosted spending on recreation services.

Outlays on financial services and insurance rose as did those on healthcare, housing and utilities. Spending on services advanced 0.5 per cent, matching July’s gain.

Businesses scramble to decipher Trump’s new wave of tariffs

Households also bought recreational goods and vehicles, clothing and footwear, and spent more on gasoline and other energy goods as well as food and beverages. Goods outlays shot up 0.8 per cent after rising 0.6 per cent in July.

Spending has marched ahead despite the significant slowdown in the labour market. Consumption is being driven by high-income households as a robust stock market and still-elevated home prices boost their wealth. Fed data this month showed household wealth jumped to a record US$176.3 trillion in the second quarter.

But lower-income households are struggling, and bearing a large share of the burden from higher prices on goods from import tariffs. More pain lies ahead when cuts to the federal government’s Supplemental Nutrition Assistance Program, commonly known as food stamps, take effect.

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The dollar slipped against a basket of currencies. U.S. Treasury yields were little changed.

Economists expect spending will slow

Personal income rose 0.4 per cent last month after a similar gain in July. A 0.6 per cent increase in government transfers accounted for much of the rise in income, with wages rising only 0.3 per cent.

Strong consumer spending contributed to gross domestic product growing at a 3.8-per-cent annualized rate in the second quarter, the fastest in nearly two years. Before the consumer spending data, the Atlanta Fed was forecasting GDP rising at a 3.3-per-cent rate in the third quarter.

Economists expect spending to slow considerably by the end of the year, undercut by higher prices.

Inflation rising steadily

Though there has not been a broad rise in inflation, there has been a surge in prices of some goods exposed to tariffs. Businesses have been selling inventory accumulated before President Donald Trump’s sweeping tariffs kicked in, preventing inflation from spiraling.

Producers have also been absorbing some of the duties. Economists, however, do not expect this trend to continue indefinitely and expect businesses will at some point pass on the tariffs to consumers on a wider scale. Inventories were drawn down in the second quarter.

The Personal Consumption Expenditures (PCE) Price Index increased 0.3 per cent in August after gaining 0.2 per cent in July, the BEA said. In the 12 months through August, the PCE Price Index advanced 2.7 per cent. That was the biggest year-on-year increase since February and followed a 2.6-per-cent rise in July.

Excluding the volatile food and energy components, the PCE Price Index rose 0.2 per cent last month after increasing 0.2 per cent in July. In the 12 months through August, the so-called core inflation index increased 2.9 per cent after rising 2.9 per cent in July.

The Fed tracks the PCE price measures for its 2-per-cent inflation target. The U.S. central bank last week resumed policy easing, cutting its benchmark overnight interest rate by 25 basis points to the 4.00 per cent-4.25 per cent range.

Fed Chair Jerome Powell said this week that “near-term risks to inflation are tilted to the upside and risks to employment to the downside – a challenging situation.”

Real gross domestic product grew in July for the first time in four months andby slightly more than expected, suggesting the economy will likely avoid a recession this year as U.S. tariffs batter key Canadian sectors.

Statistics Canada reported Friday that the 0.2-per-cent increase in real GDP was largely driven by growth in good-producing industries. The mining, quarrying and oil and gas extraction sector led growth in July, expanding by 1.4 per cent.

The federal agency’s advance estimate for August indicates the economy was unchanged that month.

The rebound in growth in July, along with the August estimate, suggest the economy expanded in the third quarter. That follows a 1.6-per-cent annualized contraction in the second quarter as the U.S. imposed steep tariffs on its trading partners.

“Growth in Canada’s tariff-impacted industries contributed most to July’s brighter-than expected print. Stabilization across these sectors underpins our view that GDP growth in the third quarter is set to recover modestly after last quarter’s trade-driven contraction,” wrote TD economist Marc Ercolao in a client note.

Port of Vancouver handles record volumes as Canadian trade shifts toward Asia

Auto manufacturing expanded, iron and steel declined as tariffs bite

Motor vehicle parts and motor vehicle manufacturing expanded by 10.5 per cent and 9.1 per cent respectively in July, which coincided with an increase in exports of those goods that month, the Statscan report noted.

However, activity in iron and steel mills and ferro-alloy manufacturing was down by about 25-per-cent since February, before the U.S. imposed a 25-per-cent tariff on steel imports in March.

The industry group in July experienced its steepest decline since April 2020, contracting by 19.1 per cent after U.S. President Donald Trump doubled the tariff rate to 50 per cent in June.

How GDP figures might affect Bank of Canada interest rates

CIBC senior economist Andrew Grantham said the economy is tracking for 0.8-per-cent annualized growth in the third quarter, which is stronger than previously expected but lower than the Bank of Canada‘s forecast in July.

“We think that a further interest rate cut is still warranted, and continue to forecast a move at the October meeting, although upcoming employment and CPI data remain important to that call,” Mr. Grantham wrote in a client note.

The Bank of Canada cut its key interest rate by a quarter of a percentage point last week for the first time in six months, in response to weakening economic conditions.

Governor Tiff Macklem offered no hints about where interest rates are headed next, despite an expectation amongst analysts that the central bank may have to cut again this year to give the economy a boost.

Mr. Macklem instead emphasized the ongoing uncertainty looming over the economy and said the central bank will be less forward-looking for that reason.

The outcome of the Bank of Canada’s next rate decision on Oct. 29 is up in the air.

Interest rate swaps, which capture market expectations of monetary policy, suggest there’s a 42-per-cent chance that the central bank cuts again by a quarter-percentage-point, according to Bloomberg data as of Friday morning, shortly after the GDP release.

However, with a slew of economic data being released over the coming month – including labour and inflation figures – rate expectations are poised to shift.

The Bank of Canada’s key interest rate now stands at 2.5 per cent.

U.S. tariff negotiations crucial to Canada’s economic outlook

The federal government’s ability to secure any tariff relief from the Trump administration will play a key role in the economic outlook moving forward.

The US. continues to impose 50-per-cent tariffs on all steel and aluminum imports.

The automotive industry faces a 25-per-cent tariff (with a carve-out for the value of U.S. auto parts in Canadian-made vehicles).

After failing to secure a deal on trade, Prime Minister Mark Carney’s government dropped most of its retaliatory tariffs this month in a bid to move negotiations along with the U.S.

U.S. President Donald Trump on Thursday expanded his list of tariffs to include heavy-duty trucks, various home goods and pharmaceuticals, taking effect on Oct. 1

• Honda Motor is ending U.S. production of its Acura ZDX electric crossover, citing market conditions for EVs.
• Production of the vehicle for the 2026 model year was slated to begin this month at GM’s Spring Hill Assembly plant in Tennessee

https://www.cnbc.com/2025/09/24/honda-acura-ev-gm.html

Micron Technology MU forecast first-quarter revenue above market estimates on Tuesday, betting on booming demand for artificial intelligence hardware to boost sales of its advanced memory chips.

Shares of the memory-chip maker rose 4 per cent in extended trading.

The race to build the most sophisticated AI models and expand the data centre infrastructure that they run on has boosted demand for Micron’s high-bandwidth memory chips, or HBM.

Micron supplies HBM for some of AI chip leader Nvidia’s NVDA-Q -1.49%decrease semiconductors, which dominate the lucrative AI accelerator market.

Much of the competition among the world’s largest memory suppliers – Micron, SK Hynix and Samsung SSNLF +9.01%increase – has centered on becoming a key supplier to Nvidia, owing to the world’s most valuable company’s dominant market position.

Micron forecast first-quarter sales of US$12.5-billion, plus or minus US$300-million, compared with the analysts’ average estimate of US$11.94-billion, according to data compiled by LSEG.

The company reported revenue of US$11.32-billion for the fourth quarter, beating estimates of US$11.22-billion.

• Sales of newly built homes rose a much larger-than-expected 20.5% in August compared with July, according to the U.S. Census.
• That’s despite mortgage rates that are higher than they are today.
• The median price of a new home sold in August was $413,500, in increase of 1.9% year over year.

https://www.cnbc.com/2025/09/24/august-new-home-sales-soar.html

• 
  Instagram now has 3 billion monthly active users, Meta CEO Mark Zuckerberg said Wednesday.
• With 3 billion monthly users, Instagram joins the ranks of the Facebook and WhatsApp platforms, both of which crossed the 3 billion user mark earlier this year.
• The company last disclosed Instagram’s user figures in October 2022 when Zuckerberg said during an earnings call that the app had crossed 2 billion monthly users.

https://www.cnbc.com/2025/09/24/instagram-now-has-3-billion-monthly-active-users.html

The U.S. has long accused Canada’s softwood lumber sector of violating rules on anti-dumping – flooding a market with cheaper, subsidized products to disrupt a domestic industry.

The U.S. Commerce Department announced plans last month to nearly triple duties on Canadian softwood lumber to just over 20 per cent.

The Wall Street Journal first reported this week that Canada dropped long-standing appeals earlier this month on two U.S. anti-dumping reviews dating back to the previous decade.

Analysis: Can Canada finally sell more of its lumber overseas?

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Global Affairs Canada spokeswoman Dina Destin says Canada made the decision after consulting with industry players and provinces, and in the interest of securing a long-term deal on softwood lumber with the United States.

She says Canada still believes U.S. anti-dumping duties on softwood lumber are unfair and Ottawa is still pursuing six other legal challenges on the matter.

Canada has dropped two legal challenges of United States duties on Canadian softwood lumber.

The U.S. has long accused Canada’s softwood lumber sector of violating rules on anti-dumping – flooding a market with cheaper, subsidized products to disrupt a domestic industry.

The U.S. Commerce Department announced plans last month to nearly triple duties on Canadian softwood lumber to just over 20 per cent.

The Wall Street Journal first reported this week that Canada dropped long-standing appeals earlier this month on two U.S. anti-dumping reviews dating back to the previous decade.

Analysis: Can Canada finally sell more of its lumber overseas?

Lumber prices haven’t bottomed yet. Here’s when they will

Global Affairs Canada spokeswoman Dina Destin says Canada made the decision after consulting with industry players and provinces, and in the interest of securing a long-term deal on softwood lumber with the United States.

She says Canada still believes U.S. anti-dumping duties on softwood lumber are unfair and Ottawa is still pursuing six other legal challenges on the matter.

Ottawa should regulate the cost and time it takes Canadians to transfer tax-advantaged investment and savings accounts from one financial institution to another, some digital brokers have told federal officials.

In the lead-up to the 2025 federal budget expected on Nov. 4, both Wealthsimple Technologies Inc. and Questrade Financial Group Inc. said they are involved in consultations with the government about setting standards for account transfer fees and timelines. The talks focus on what’s known as registered accounts, such as tax-free savings accounts, or TFSAs, and registered retirement savings plans, or RRSPs.

Transfer fees, also known as exit fees, for registered accounts have roughly doubled since the 2010s, with many banks and investment dealers now charging $150 per account, Wealthsimple said in a recent federal budget submission. Citing internal data, the company also said it often takes more than a month and a half for sending institutions to move the money, even after receiving all required documentation.

Wealthsimple asks Ottawa to review rising bank transfer fees

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Wealthsimple and Questrade, which are courting consumers who invest through the big banks or their subsidiaries, have an interest in seeing regulatory checks on transfer fees and delays. But investor advocates say consumers at large would benefit from cheaper and faster account transfers.

“When you think about having to pay exit fees, it’s like a penalty for switching to a new financial institution that might be able to better serve your needs,” said Jean-Paul Bureaud, executive director at FAIR Canada, a national organization that ​​champions the interests of individual investors.

Mr. Bureaud also said it is common for account transfers to take weeks or even months, a timeline he called “shocking.”

The long wait times can also deliver a financial hit for consumers, who might lose out on market opportunities or forgo interest income while their money sits on the sidelines instead of being invested, he said. Sometimes, investors may miss contribution deadlines because of transfer delays, he added.

Account transfer issues have long been a source of customer complaints. But the main effort to address the concerns has so far occurred at the provincial level. The Canadian Investment Regulatory Organization, or CIRO, oversees investments dealers on behalf of provincial regulators, and has proposed a standard settlement period of 10 clearing days for account transfers.

But in talks leading up to the federal budget, Wealthsimple and Questrade have asked Ottawa to regulate transfers specifically of tax-advantaged accounts, which are registered with the federal government.

These also include registered education savings plans, or RESPs, which help families save for a child’s education after high school, and first home savings account, or FHSAs, which help first-time homebuyers save for a house.

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“We have provided input in pre-budget consultations with the federal government and advocated for a regulatory standard for transfer fees and timelines for registered accounts,” Questrade spokesperson J.R. Gabriel told The Globe and Mail in an e-mailed statement.

In its budget submission, Wealthsimple argued that the federal government has “sole and complete jurisdiction” over registered accounts. Ottawa, it said, should use “its unilateral authority to impose conditions on how those accounts are administered, including restrictions on fees, no matter whether the account is offered by a federally- or provincially-regulated financial institution.”

Wealthsimple exec apologizes to customers after data breach, says no account details were misused

The Department of Finance did not answer a question from The Globe about whether it has the ability to impose caps on transfer fees for registered accounts, but said more details on the government’s agenda will be available in the budget.

Questrade said it covers transfer fees up to $150 for incoming funds, with no minimum account size requirements for the refunds. Wealthsimple said it reimburses the charges for account transfers worth $25,000 or more, but does so automatically, without waiting for customers to ask for the rebate, as is common industry practice.

Both institutions are also raising the issue of long transfer times with Ottawa. Wealthsimple said that between October, 2024, and March, 2025, for 45 per cent of its incoming transfers of registered plans, originating institutions relied on fax and mailed cheques to execute customer requests to move their money.

In addition to setting a 10-day clearing standard, the CIRO proposal would also require investment dealers to use an automated system for eligible transfers. The proposed rule changes are currently subject to consultations.

Separately, the Canadian Bankers Association, a lobby group that includes all the big banks, has voluntary guidelines that ask banks to process transfers within seven to 12 business days for registered accounts. Banks only offer investment options such as savings accounts and guaranteed investment certificates for registered accounts, though many offer other investments through subsidiary dealers.

Wealthsimple has recommended that Ottawa conduct compliance audits of the guidelines.