Mixed fortunes for financial services in latest Canadian GDP

The sector posted an overall gain, but the detail reveals what's driving the increase

Mixed fortunes for financial services in latest Canadian GDP
Steve Randall

Canada’s economy gained in the third quarter of 2021, with a 1.3% expansion driven by a jump in spending by more-confident consumers.

For the finance and insurance sector, there was a 2% gain, following a 0.7% decline in the previous quarter, Statistics Canada reported.

All three elements of this sector gained, with Credit intermediation and monetary authorities up 1.8% (driven by banks and other deposit intermediaries), Insurance carriers and related activities up 2.1%, and financial investment services up 2.4%.

However, while there was a fourth consecutive monthly increase in the September figures, only one of the sub-sectors gained as the 0.3% gain was powered by a rise in interest from loans and mortgages.

This 0.6% gain for credit intermediation and monetary authorities enabled the overall sector to offset a 0.4% decline in financial investment services, funds, and other financial vehicles, and a 0.1% decline in insurance carriers and related activities.

Wages rise

While consumer spending was up in the third quarter along with demand for exports, there was a fall in housing investment although residential mortgages gained $38 billion which is more than double the level two years earlier.

Employees earned more in Q3, 2021. Compensation was up 2.9% and this was the largest increase since the second quarter of 2000. However, it should be noted that a significant chunk of this was in accommodation and food services.

As Canadians enjoyed spending their cash again, the savings rate fell to 11% in the third quarter from 14% in the previous period. This remains above the pre-pandemic rate.