Household debt ratio hits record - Statistics Canada
Tavia Grant
Globe and Mail Update
Published Monday, Dec. 13, 2010 9:47AM EST
Last updated Monday, Dec. 13, 2010 7:47PM EST
Household debt loads are getting heavier.
The ratio of household credit market debt-to-personal disposable income hit a record 148.1 per cent in the third quarter from 143.4 per cent in the prior quarter, Statistics Canada said Monday. Much of the reason stemmed from a 1.5-per-cent drop in disposable income.
Other measures of debt are rising too. Household debt, household debt per capita and debt-to-personal disposable income are all increasing, a development that has sparked concern among Bank of Canada officials and federal policy makers alike.
Bank of Canada Governor Mark Carney said last week that the growth of household debt, which has outpaced incomes, has deepened the vulnerability of the household sector. He is scheduled to speak later today, and will doubtless face more questions about that fragility.
Meantime, the federal government is consulting with economists about whether to introduce policies that would cool the mortgage market, the Globe and Mail reported Monday.
The Statscan release underscored how Canadians’ appetite for piling on more debt is undiminished.
“The trend is still that debt accumulation is faster than disposable income – and that is a worrisome trend over the long haul,” said Pascal Gauthier, senior economist at TD Bank Group. “We should look at this before we reach extreme levels, but the question is, what are extreme levels?”
In the U.S., the ratio of household credit market debt to personal disposable income peaked at about 162 per cent. That ratio has since fallen as Americans have reigned in spending.
Debt may be growing in Canada, but so is net worth. Household net worth grew 2.7 per cent in the third quarter, the strongest quarterly growth in a year, as stock markets rose. Household per capita net worth rose to $178,600 from $174,500 in the second quarter, Statscan said.
Households have now “fully recovered the cumulative $552-billion of net worth that evaporated from their balance sheets during the economic downturn,” noted David Onyett-Jeffries, economist at Royal Bank of Canada. “These gains, however, have been accompanied by increases in debt and as a result household debt levels are at all-time highs.”
He expects household debt growth to moderate next year, though “these historically high household debt burdens will weigh on consumers and likely limit the pace of growth in consumer spending” through 2011.
The current rate, at 148.1 per cent, is the highest since record-keeping began for that series in 1990. Back when the series began, the ratio was 87 per cent.
Most Canadians are comfortable with their debt levels, a separate survey showed Monday. Two thirds, or 67 per cent, of respondents said they’re fine with their debt loads, according to a consumer lending survey released today by PricewaterhouseCoopers.
Sixty-four per cent say they plan on cutting their debt over the next year. The most common items they plan to delay buying, to curb their borrowing, is a new car, new electronics and a new or bigger house.
Still, even with historically high consumer debt levels, more than three quarters, or 78 per cent of respondents, said they think they have the capacity to borrow even more.
Tavia Grant
Globe and Mail Update
Published Monday, Dec. 13, 2010 9:47AM EST
Last updated Monday, Dec. 13, 2010 7:47PM EST
Household debt loads are getting heavier.
The ratio of household credit market debt-to-personal disposable income hit a record 148.1 per cent in the third quarter from 143.4 per cent in the prior quarter, Statistics Canada said Monday. Much of the reason stemmed from a 1.5-per-cent drop in disposable income.
Other measures of debt are rising too. Household debt, household debt per capita and debt-to-personal disposable income are all increasing, a development that has sparked concern among Bank of Canada officials and federal policy makers alike.
Bank of Canada Governor Mark Carney said last week that the growth of household debt, which has outpaced incomes, has deepened the vulnerability of the household sector. He is scheduled to speak later today, and will doubtless face more questions about that fragility.
Meantime, the federal government is consulting with economists about whether to introduce policies that would cool the mortgage market, the Globe and Mail reported Monday.
The Statscan release underscored how Canadians’ appetite for piling on more debt is undiminished.
“The trend is still that debt accumulation is faster than disposable income – and that is a worrisome trend over the long haul,” said Pascal Gauthier, senior economist at TD Bank Group. “We should look at this before we reach extreme levels, but the question is, what are extreme levels?”
In the U.S., the ratio of household credit market debt to personal disposable income peaked at about 162 per cent. That ratio has since fallen as Americans have reigned in spending.
Debt may be growing in Canada, but so is net worth. Household net worth grew 2.7 per cent in the third quarter, the strongest quarterly growth in a year, as stock markets rose. Household per capita net worth rose to $178,600 from $174,500 in the second quarter, Statscan said.
Households have now “fully recovered the cumulative $552-billion of net worth that evaporated from their balance sheets during the economic downturn,” noted David Onyett-Jeffries, economist at Royal Bank of Canada. “These gains, however, have been accompanied by increases in debt and as a result household debt levels are at all-time highs.”
He expects household debt growth to moderate next year, though “these historically high household debt burdens will weigh on consumers and likely limit the pace of growth in consumer spending” through 2011.
The current rate, at 148.1 per cent, is the highest since record-keeping began for that series in 1990. Back when the series began, the ratio was 87 per cent.
Most Canadians are comfortable with their debt levels, a separate survey showed Monday. Two thirds, or 67 per cent, of respondents said they’re fine with their debt loads, according to a consumer lending survey released today by PricewaterhouseCoopers.
Sixty-four per cent say they plan on cutting their debt over the next year. The most common items they plan to delay buying, to curb their borrowing, is a new car, new electronics and a new or bigger house.
Still, even with historically high consumer debt levels, more than three quarters, or 78 per cent of respondents, said they think they have the capacity to borrow even more.