Briefly: “Canadian GDP worse than expected” and more of Friday’s news

The Canadian economy contracted 0.7% in November, according to the latest data from StatsCan. That’s almost double the rate of contraction expected by economists, with a consensus estimate of 0.4%.

In October, the decline had been just 0.1%.

“The combination of the fall’s intense financial market volatility and the deepening global downturn caught up with Canada big-time in November,” wrote BMO Nesbitt Burns deputy chief economist Douglas Porter. “After largely skating above the fray for a spell, the economy clearly reached a breaking point late last year.”

Porter said that when December’s data is released, he expects Canadian real GDP will be roughly in line with that of the U.S. for the fourth quarter.

“By the same token, Canada will have to look south for the first inklings of recovery, and that awaits the second half of this year…if everything goes right,” he wrote.

So far, things don’t look so good south of the border, where real GDP contracted by 3.8% on an annualized basis in the fourth quarter. There is some good news, however: That beat consensus estimates of a 5.5% decline for the month of December alone.

“Despite the better-than-expected print on U.S. economic activity, the fact remains that the U.S. economic recession intensified in a fairly dramatic fashion in Q4,” wrote TD Securities economics strategist Millan Mulraine. “And with the financial sector turmoil and labour market woes likely to continue for some time, we continue to believe that a recovery in economic activity remains some way off, with the recession expected to drag well into this year.”

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TD backs down on “inactivity fee”

The customer has spoken and the bank has listened. TD Canada Trust has announced that it will not charge its customers an inactivity fee for unsecured lines of credit.

The new fee was slated to kick in at the end of April and would have seen clients tapped for $35 simply for the privilege of having the line of credit.

The negative feedback was so overwhelming that the bank has committed to introduce no new fees or fee increases on personal and small business banking products, through to the end of 2009.

“We’ve been listening to the concerns our customers and employees have been expressing, and we believe that this commitment is the right response in the current environment,” said Tim Hockey, president and CEO, TD Canada Trust. “We recognize that times are challenging for many people right now. Holding the line on fees is one tangible way of helping.”

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Capital International to merge global funds

Capital International Asset Management is seeking unitholder approval to merge its Global Small Cap fund into its Global Equity fund. The small cap fund has already been closed to new investors.

“We believe unitholders of the Capital International – Global Small Cap fund will benefit from the greater economies of scale offered by Capital International – Global Equity, which has a larger asset base and a lower MER,” explained Capital International president, Mark Tiffin. “In addition, both funds have complementary global mandates that seek to provide exposure to global growth companies of different sizes.”

If approved, the merger will be effective on or about April 20, 2009, and the small cap fund will be terminated. It currently only holds about $14 million in assets.

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Laurentian offers market-linked GIC

Laurentian Bank is offering a market-linked GIC, aimed at investors who are particularly jittery in the current market environment.

The Income ActionGIC provides a return based on the performance of the S&P/TSX 60 index, and offers a guaranteed minimum return of 8% over the five-year term.

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Manulife offers portable benefits

Manulife Financial Group Benefits has launched Personal Benefits, through which employers can now introduce their employees to portable life and critical illness insurance coverage.

With portable coverage, Manulife contracts directly with the employee, allowing employees to retain their coverage, regardless of their employment status.

Manulife Group Benefits takes on the administration and deals directly with the plan member. It provides direct communication and educational support to explain the value of these protections to interested employees, who can then elect to purchase the additional coverage for themselves, their spouse and their children.

“Manulife is responding to the changing needs evident in the marketplace,” says Rick Brunet, executive vice-president, Manulife Financial Group Benefits. “In the past, employers and employees were not concerned about the portability of traditional benefit coverage; this need has changed and we are happy to respond.”

Brunet says that Manulife is starting with its life and critical illness products, but that there is potential to expand into a broader range of products.

(01/30/09)