Canada: Household indebtedness eases marginally – RBC

Sandeep Kanihama FXStreet Contributor

Robert Hogue, senior economist at Royal Bank of Canada, notes that Canada’s debt-to-income ratio has dipped marginally to 177% in Q2 as debt service ratio matches all-time high of 14.9%, with back-to-back asset gains propelling net worth to new heights.

Key Quotes

“The national balance sheet accounts overall provided a mildly encouraging picture for households but with one major caveat: debt servicing costs continued to eat up a (very slightly) larger share of disposable income.”

“Significant declines in interest rates over the past several months and slow growth in household debt (which grew at a near cycle-low of 3.8% in Q2) are poised to bring some relief on that front in the period ahead though. The oft-cited debt-to-income ratio edged lower for the third-straight quarter albeit marginally.”

“At 177%, it still points to elevated household indebtedness in Canada. A sizable rebound in both financial and real estate assets over the first half of this year bolstered net wealth. Policy makers no doubt will find something to like in these numbers. Yet we’re still a long distance from writing off household debt from the list of top vulnerabilities for Canada’s economy.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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