Robert Both, macro strategist at TD Securities, points out that the Canadian household balance sheets for 2019Q2 showed slight progress in the deleveraging process.
Key Quotes
“Canadian households still owe $1.77 for every dollar of income and spend 14.9% of disposable income on debt payments, which represents a significant headwind to future consumption growth.”
“The deleveraging process will take time and leave debt-service ratios elevated over the projection horizon. We estimate that every 1% rise in the debt-service-ratio coincides with a 0.1-0.2pp drag on consumption over the following year.”
“Complicating matters is an already low savings rate. Further declines can provide a slight boost to consumption, but should households prioritize saving to guard against future rate hikes it would result in a more sluggish pace of spending.”
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