This Week’s Top Stories: Canadian Spending Freeze Begins, & Toronto New Home Sales Crash

Canada’s economy showed a small gain of 0.5% in the first quarter of 2025, but that hides a deeper issue: Canadians are spending less. Even though exports helped push the overall number up, everyday spending and trade have faded. This signals that the economy’s strength is largely driven by overseas demand, while people at home are tightening their belts.

Household spending, often the engine of growth, has now come to a standstill. After years of growth, the slowdown is worrisome. With money being saved instead of spent, many businesses will feel the pinch. Canadian Real GDP might still be growing, but fewer people buying goods and services means the country’s economic momentum is losing steam.

In Toronto, new home sales collapsed in April. Only 310 homes were sold—a drop of 72% from normal levels and far below the ten-year average. This is the worst month on record. Meanwhile, supply is climbing: about fifteen months’ worth of houses are now on the market. That imbalance between fewer buyers and more homes is pushing the housing market toward a correction.

Despite the crash in sales, new home prices haven’t dropped much yet. Prices remain “sticky,” meaning they’re slow to fall even when demand is weak. That mismatch raises concern: prices might suddenly shift if the market corrects more deeply. For now, though, sellers are holding firm above what the current market can support.

This broader pattern is strengthening fears of a “spending freeze.” With consumer confidence low and household debt high, people are choosing to save rather than spend on big-ticket items like homes, cars, and renovations. Earlier this year, Canada also saw record-high consumer insolvency filings—only in 2010 and 2020 did more Canadians declare insolvency. That shows financial strain is widespread and may worsen.

The combination of stalled household spending and a housing market in crisis poses a real test for policy makers. If Canadians continue holding tight to their wallets, businesses will struggle and economic growth may falter. Meanwhile, the Toronto housing market hangs in a fragile balance—too much supply, too few buyers, and prices that may soon respond. All eyes are on what comes next.