• Central banks continued to fight rising inflation
    • Supply-chain issues and soaring fuel costs pushed prices sharply higher
    • Several central banks raised interest rates in an attempt to contain inflation
  • Global equity markets extended their losses for another quarter 
    • The Russia-Ukraine conflict underscored the persistence of geopolitical uncertainty
    • Rising inflation created the potential for higher interest rates and slower growth
  • Energy prices continued to climb 
    • Demand for gas rose as travel resumed and sanctions against Russian oil remained
    • The cost of gasoline reached record-high levels in Canada and the U.S.

What do rising gas prices mean to you?

Factor Outcome

Buying a car

Rising gas prices may have you rethinking a car purchase. The market for new or used cars remains quite tight. Supply-chain issues mean long wait times for new cars. A shortage of used cars has also put upward pressure on prices. 

Thinking about switching to a hybrid or electric vehicle? It may be suitable for you depending on how much you drive. These vehicles will certainly save on gas. But, they generally cost more to buy.  

Maintaining a household budget

Rising gas prices may affect your household budget as a greater percentage will go to transportation expenses. You may be able to limit your driving somewhat if you can work from home or if you’re retired. You’re sending the kids to summer activities? Keep a close eye on how much money you spend on gas.
Summer travel plans “up in the air”

COVID-19-related travel restrictions have eased. Now may be the perfect time to enjoy a summer break overseas. But it might cost you more to fly now than it did before. Statistics Canada reported that airfares rose 13% from February to April 2022. 

Demand remains high and prices are soaring. Frustrating delays and cancellations are also common these days. You may wish to skip the airport chaos and relax closer to home this year. 

A united push to manage inflation 

The world’s major central banks either:  

  • raised interest rates over the quarter or,  
  • signalled their intent to increase rates if inflation continued to surge.  

The Bank of Canada (BoC) and U.S. Federal Reserve Board were among the central banks to raise interest rates. The Bank of England also increased its key policy rate during the quarter.  

The European Central Bank announced a likely end to the asset-purchase program it had initiated at the start of the pandemic to help keep Europe’s economy afloat. 

Economic growth figures for the first quarter of 2022 were reported in the second quarter.  

  • The U.S. economy contracted by 1.6% annualized in the first quarter. Restrictions imposed to combat the spread of the Omicron COVID-19 variant disrupted business operations.
  • Europe’s economy expanded by 0.6% over the first quarter of 2022.
  • Japan’s 0.5% decline in annualized gross domestic product (GDP) reversed the expansion achieved in the previous quarter.
  • China’s economy continued to expand as it grew by 4.8% year-over-year in the first quarter. 

Financial markets reflected the challenging economic environment 

  • Equity markets broadly declined over the second quarter of 2022 as central banks struggled to manage inflation.
  • Markets in the U.S. and U.K. weakened. Stocks also declined in emerging markets and across Europe and the Far East. Canadian equities failed to build on the previous quarter’s gains and moved lower as well.
  • Rising consumer prices and forecasts for slower global economic growth also weighed on investor sentiment. It also put pressure on the markets.
  • Geopolitical uncertainty continued in Ukraine. The World Bank forecasted that Ukraine’s economy may contract by a staggering 45% in 2022. Many Western nations implemented heavy financial sanctions targeting the assets of prominent Russian government officials.
  • Bond yields advanced over much of the quarter in response to rising inflation and continued monetary tightening by major central banks.
  • Oil prices increased again during the quarter and at one point had approached the previous quarter’s high level.
  • Many Western countries turned to non-Russian sources of oil given the sanctions imposed against Russia. Major oil producers agreed to increase production in an attempt to compensate for the loss of Russian oil in the global market.
  • Gold prices decreased over the quarter amid ongoing geopolitical uncertainty. 

A slowing of Canada’s economy  

  • GDP in Canada grew at an annualized rate of 3.1% in the first quarter of 2022. Growth slowed largely as a result of a decline in international exports.
  • Canada’s growth was somewhat supported by business investment and household consumption. This support was offset by interest rate increases and higher inflation that served to hinder economic activity.
  • The BoC raised its benchmark overnight interest rate twice by 50 basis points each to end the quarter at 1.50%. The BoC’s aggressive stance recognized surging inflation and a tight labour market.
  • Canada’s inflation rate (7.7% in May) was its highest since 1983. The BoC stated that interest rates may continue moving higher if inflation remains elevated.
  • Rising prices of gasoline and food contributed to elevated consumer prices in Canada. The cost of shelter also rose for Canadians. These higher prices forced many households to take on higher debt levels.
  • Strong demand and limited supply in Canada’s labour market led the unemployment rate to decrease to 5.1 % as thousands of jobs were added in May.
  • The yield on the 10-year Government of Canada bond finished higher over the quarter. Canadian bond prices followed the path of Canadian equities and declined over the quarter.  


  • The Russia-Ukraine conflict may continue to pose significant risk to the global economy. Inflationary pressure on commodities like energy and food will be probable consequences of the conflict.
  • A tight labour market and resilient consumer spending amid easing pandemic-related restrictions may support economic activity in the near term. Economic activity is likely to cool in subsequent quarters as higher interest rates and diminished savings serve to challenge consumers.
  • Monetary policy tightening should continue over 2022 as central banks confirmed their commitment to fighting inflation. Rising interest and mortgage rates could reduce household spending power.
  • The price of oil may remain elevated in response to increased demand and ongoing supply concerns. This, in a widespread sanctions on Russian oil imports. The world’s major energy producers reiterated that global oil demand in 2022 should exceed levels seen in the period leading up to the pandemic.
  • Consumers in Canada will likely face higher prices that hinder spending and eat into their savings. The real estate market has shown signs of cooling in response to rising mortgage rates and may slow further. Still-elevated prices from strong gains in the real estate market over the past year could continue to impact affordability.
  • It’s anticipated that the BoC will increase its benchmark overnight interest rate once again at its next meeting in July to help tame inflation.

This commentary contains information in summary form for your convenience. Although this commentary has been prepared from sources believed to be reliable, Sun Life can’t guarantee its accuracy or completeness. Plus, this commentary is intended to provide general information and should not be seen as providing specific individual financial, investment, tax, or legal advice. The views expressed are those of the author and not necessarily the opinions of Sun Life. Please note, any future or forward-looking statements contained in this commentary are speculative in nature and cannot be relied upon. There is no guarantee that these events will occur or in the manner speculated.