Canada’s economy shrinks, mortgage balances grow and Freeland imposes measures on Wealth One Bank: Business and investing news for Sept. 3

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In the second quarter, the Canadian economy experienced a decline of 0.2 percent, which further supports the argument for the Bank of Canada to maintain stable interest rates in the upcoming week.

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Canada's Economy Shrinks In Q2

In a surprising turn of events, Canada experienced a decline in its economy during the second quarter of 2023. Statistics Canada reports that the economy shrunk by 0.2% on an annualized basis, primarily due to a decrease in housing investment and reduced consumer spending. This unexpected slump in GDP not only fell short of the predictions made by the Bank of Canada and Bay Street, but also suggests that the impact of higher interest rates on economic activity might be greater than previously thought. As a result, it strengthens the argument in favor of the Bank of Canada maintaining steady interest rates in the upcoming week.

Restrictions Set For Wealth One Bank's Founders By Freeland

According to a report by Robert Fife and Steve Chase, Finance Minister Chrystia Freeland has placed special national security requirements on the original investors of Wealth One Bank of Canada due to their alleged connections to Beijing. The report states that Toronto insurance executive Shenglin Xian, grocery mogul Yuangsheng Ou Yang, and affluent Vancouver property developer Morris Chen have been instructed to sell their shares in the bank, which is based in Toronto. Additionally, Wealth One has been ordered to cut all connections with the three shareholders. The Canadian Security Intelligence Service has been investigating both the bank and shareholders since 2021 due to concerns regarding Chinese government pressure and potential money laundering.

Declining Job Vacancies: Is The Labor Market Cooling?

Canada is seeing a decline in job openings, indicating that the job market is slowing down and higher interest rates may be having the desired effect. According to Statistics Canada, the number of job vacancies decreased by 1.2% to 753,400 in June, after reaching a peak of over one million in May 2022. This is the lowest level in over two years. Additionally, Canadian workers are also switching jobs less frequently, as indicated by the latest job-changing rate. This decrease in job vacancies and the decrease in labor demand could potentially allow the Bank of Canada to keep interest rates stable in the upcoming decision.

Big Banks' Q3 Earnings Reviewed

After the financial results of Royal Bank of Canada and Toronto-Dominion Bank were made public last week, the other major banks in Canada also reported their earnings for the third quarter. Bank of Nova Scotia managed to meet the predictions of analysts, but Bank of Montreal, National Bank of Canada, and Canadian Imperial Bank of Commerce fell short. Stefanie Marotta's report states that most of the six largest banks in Canada experienced a decrease in Q3 profits due to increased expenses, a decline in capital markets earnings, and the need to set aside more money for potential loan defaults.

Mortgaged Homeowners: Rising Balances At Large Banks

Further developments have emerged regarding Canadian banks, as individuals who have mortgages at Bank of Montreal, Toronto-Dominion Bank, and Canadian Imperial Bank of Commerce are witnessing a significant increase in the amounts they owe due to the sudden surge in interest rates. Approximately 20 percent of those who have residential mortgage loans, which amounts to nearly $130 billion, are experiencing a situation in which their loan amounts are expanding since their monthly payments no longer cover the entirety of the interest they owe. This phenomenon, referred to as negative amortization, is a strong indication of the repercussions brought about by the escalating interest rate climate, as reported by Rachelle Younglai.

Smart Moves By Women, Parents & Millennials In TFSA

Examining the most recent data on tax-free savings accounts (TFSA) contributions reveals that individuals who utilize TFSAs are utilizing them effectively. Families are supporting their young adult offspring by offering money without any tax implications, females are surpassing males in terms of contributions, and numerous millennials are making smaller yet consistent payments to ensure contributions are feasible. Rob Carrick presents four strategies that Canadians can employ TFSAs as a means to generate wealth, derived from figures released by the Canada Revenue Agency earlier this summer.

After catching up on all the latest updates, challenge yourself with our weekly business and investing news quiz and get ready for the upcoming week by referring to the Globe's investing calendar.