The Canadian economy fell at an annualized rate of 0.2 per cent in the second quarter, bolstering the case for the Bank of Canada to hold interest rates steady next week.Chris Wattie/Reuters
Getting caught up on a week that got away? Here’s your weekly digest of The Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Canada’s economy unexpectedly contracts in second quarter
Canada’s economy unexpectedly contracted in the second quarter of 2023. The economy fell at an annualized rate of 0.2 per cent, led by a drop in housing investment and a pullback in consumer spending, according to Statistics Canada. Mark Rendell reports the GDP numbers came in well below both Bank of Canada and Bay Street estimates, indicating that higher interest rates may be weighing on economic activity more than previously appreciated and bolstering the case for the Bank of Canada to hold interest rates steady next week.
Freeland imposes measures on founding shareholders of Wealth One Bank
Finance Minister Chrystia Freeland has imposed extraordinary national security conditions against the founding investors of Wealth One Bank of Canada over their alleged ties to Beijing, according to an exclusive report from Robert Fife and Steve Chase. The three businessmen – Toronto insurance executive Shenglin Xian, grocery tycoon Yuangsheng Ou Yang, and wealthy Vancouver property developer Morris Chen – were instructed to divest their shares in the Toronto-based bank. Wealth One has also been ordered to sever all ties with the three shareholders. Both the bank and shareholders have been under investigation by the Canadian Security Intelligence Service since 2021 amid concerns of Chinese government coercion and money laundering.
Another drop in job vacancies, another sign the labour market is cooling
Canada is experiencing another drop in job vacancies – a sign that the labour market is cooling and higher interest rates may be doing its intended job. In June, the number of job vacancies edged down by 1.2 per cent to 753,400, having peaked in May, 2022, at more than one million, according to Statistics Canada. That’s the lowest level in more than two years. Canadian workers are also changing jobs less frequently – as suggested by the latest job-changing rate released this week. Jason Kirby reports that the vanishing help wanted signs and the cool-down in labour demand could give the Bank of Canada more room to hold interest rates steady at next Wednesday’s decision.
A breakdown of the big banks’ third-quarter earnings
Following the release of Royal Bank of Canada and Toronto-Dominion Bank’s third-quarter financials results last week, the rest of Canada’s biggest banks continued the season of earnings. Bank of Nova Scotia just met analysts’ expectations, while Bank of Montreal, National Bank of Canada and Canadian Imperial Bank of Commerce all fell short of expectations. Stefanie Marotta reports that most of the Big Six banks saw their Q3 profits stunted due to mounting costs, a slump in capital markets earnings and climbing reserves for loans that could go bad.
Homeowners with mortgages at three big banks face growing balances
In more related news from Canadian banks, homeowners with mortgages at Bank of Montreal, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce are seeing their balances balloon because of the sharp rise in interest rates. About 20 per cent of residential mortgage borrowers – representing nearly $130-billion in loans – are seeing their loan balances grow as monthly payments no longer cover all the interest they owe. This is known as negative amortization, and as Rachelle Younglai reports, it is the clearest sign of the fallout from the rising interest rate environment.
The latest TFSA numbers highlight some smart moves being made by women, parents and millennials
A look at the latest numbers on tax-free savings accounts (TFSA) contributions acknowledge that people who do use TFSAs are using them well. Parents are helping their young adult children by providing money with no tax consequences, women are outmuscling men in contributions, and many millennials are making smaller, but more regular, payments to make contributions manageable. Rob Carrick lists four ways Canadians can use TFSAs as a vehicle for building wealth, taken from statistics issued earlier this summer by the Canada Revenue Agency.
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