The Canadian Finance Recap (May 25 - 31)

Jun 2

Canadian Banks Are Making Billions… But Cutting Jobs?

Canada’s economy beat expectations last week, but don’t celebrate just yet.

Yes, GDP came in stronger than forecast. The TSX kept climbing. And the Canadian dollar booked its fourth straight monthly gain.

But underneath the good news… Banks are laying off workers. Household spending is flat. And work-from-home is starting to disappear.

RBC made headlines this week for telling employees to return to the office at least 4 days a week. That move reflects a shift we’re seeing across Canada’s job market: less flexibility, more cost-cutting, and growing uncertainty.

So what does it all mean? And how does this connect to the Bank of Canada’s big decision coming up on Wednesday, June 4?

Let’s break it down 👇

GDP: Strong on Paper, Soft at Home

Canada’s GDP grew 2.2% in Q1, beating the expected 1.7%. That pushed the Canadian dollar higher and helped boost the TSX.

But here’s the catch… this growth didn’t come from Canadians spending more or businesses investing at home. It came mostly from exports and a rebound in resources.

Key Drivers Behind The Growth:

U.S. companies rushed to buy Canadian goods before possible new tariffs, pushing exports up
Oil, gas, mining, and construction all bounced back in March
Manufacturing stayed strong, especially auto parts and machinery
Financial services activity rose, thanks to market volatility

What Didn’t Grow:

Domestic Demand
Aka how much Canadians and Canadian households, businesses, and governments are spending inside the country was flat.
Household Spending
Barely moved, meaning people weren’t shopping more or fuelling growth.
Imports
Went up, but mostly because businesses were stockpiling goods ahead of tariff risks, not because demand is booming

In Summary: The numbers look good on the surface, but the “at home” economy is still soft. That’s why economists say this growth feels better on paper than in real life.

Canada’s Big Banks Are Nervous

This week, all six of Canada’s biggest banks reported earnings, and even though they’re still profitable, there are signs they’re bracing for tougher times.

Here’s what stood out:

Every bank raised its loan loss provisions (basically putting aside more money in case customers fall behind on debt payments).
Even banks with strong profits are cutting jobs, restructuring, and automating roles (i.e. AI is taking over jobs).
RBC, CIBC, and others have all flagged slower growth and a need to stay lean

Banks usually see the warning signs first…

If they’re tightening up, it could mean more Canadians are struggling with debt, and the job market might get even tougher (especially in finance, admin, and customer service roles).

What this could mean for you:

Tighter loan approvals
Slower hiring
More pressure on remote workers to return to the office

Banks aren’t panicking, but they’re clearly switching to defence mode.

Stock Market Recap

May Performance:

S&P 500: +6.15%
Nasdaq: +9.56%
TSX: +5.37%

U.S. Stocks: Tech Leads, Tariff Fears Return

The S&P 500 ended May on a high note, thanks in part to Nvidia’s blowout earnings. The chipmaker saw revenue jump over 69% year-over-year, thanks to continued demand for AI chips. That helped boost the entire tech sector.

There was also some relief after Trump delayed tariffs on EU goods and a federal court blocked several other proposed tariffs.

But the calm didn’t last…

By Friday, Trump was accusing China of breaking a tariff truce… reviving fears of a renewed trade war. That kind of global uncertainty tends to rattle markets and can even influence central banks in Canada.

Canadian Stocks: Quiet Confidence

The TSX rose 1.14% last week, continuing its steady climb.

Investors were encouraged by the stronger GDP numbers and signs that inflation is cooling. Financials and tech stocks helped lift the index, while energy stayed flat due to global trade worries.

With the Bank of Canada set to announce its next rate decision on Wednesday, June 4, many investors are watching closely to see if a rate cut is finally coming, or if the central bank will wait for more proof that the economy is slowing down.

So far, markets are showing cautious optimism, but that could shift quickly depending on what the BoC does next week.

Closing Notes

The headlines may sound upbeat (GDP growth, stock market gains, strong bank profits) but the full picture is more mixed.

Household spending is weak. Job cuts are rising. And work-life balance is no longer guaranteed.

This week’s data shows that while the economy isn’t in trouble yet, there’s a lot of caution beneath the surface.

With the Bank of Canada’s rate decision coming up on June 4, all eyes are on whether they’ll start cutting interest rates, or hold off a little longer.

Either way, it’s a reminder to stay focused on your long-term goals, keep your budget in check, and don’t let short-term noise shake your investing plan.

If you’re feeling the pinch and want to create a plan for your finances, I put together a free budgeting guide to help you take the first step toward your budget goals. Download Here: FREE Budgeting Guide

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Your Finance Coach, Finance Femster

Femi Orenuga