Canadian household net worth rose by 0.8 per cent in the first quarter of 2025 to $17,599.8 billion—but this trend could reverse next quarter as the effects of trade tensions persist and spread.
While a sixth-consecutive quarterly increase showed the resilience of the Canadian economy, the damage from U.S. tariffs will be seen in second- and third-quarter data.
U.S. tariffs only came into effect in March and April, so much of their effects will be reflected in upcoming data reports. Thus far, the damage is somewhat limited to trade and trade-related industries such as manufacturing.
Even the growth seen in Canadian household net worth slowed, while the household saving rate declined for a second-consecutive quarter as spending outpaced disposable income gains.
The household saving rate dropped to 5.7 per cent, which is unsurprising and not inherently worrying. During periods of slow growth, both wages and investment returns tend to stagnate. The household saving rate is reverting to its pre-pandemic level of around 5 per cent, which is typical for Canadian households.
A reversal in the trend of growing net worth would be more concerning, as it could indicate that households are saving less and becoming poorer.
While the equity market has recovered all losses so far, this is not guaranteed in a period of economic downturn.
It’s also important to consider the distribution of net worth growth. If gains are concentrated in the top income bracket, there are negative implications for the average Canadian household and the overall economy.
The wealthiest 20 per cent of households already hold over two-thirds of financial assets and over half of real estate. More wealth concentrated at the top means there is relatively less purchasing power for most Canadians.
Mortgage demand has slightly decreased from 30.7 billion in the fourth quarter of 2024 to 27.3 billion in the first quarter of 2025—aligning with a cooler spring market. When people are concerned about job security, they are less likely to purchase homes.
The housing market is expected to remain lukewarm through the summer. Although there are signs of investors warming up to real estate, the investment outlook heavily depends on the outcome of Canada-U.S. trade negotiations.
While investments have stalled, especially compared to the U.S., Canada still maintains an edge over many countries as the global economy slows. The average effective tariff rate the U.S. imposes on Canadian imports remains lower than for most other countries, suggesting that U.S. demand for Canadian goods and services will likely persist.
The takeaway
Expect household net worth to increase slowly going forward as wage growth stagnates and unemployment rises. Savings might remain steady as households reduce spending and save more during this period of heightened uncertainty.
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