One would think that with the latest stats released by the TransUnion credit reporting firm, saying that credit spending was up by Canadians late last year, Finance Minister Jim Flaherty and the Bank of Canada would have reason to worry. They have, after all, been continuously warning us that the low interest rate party in Canada is going to come to an end sooner or later, all the while reminding us that our household debt levels are sky-high. But there’s no reason for them, or us, to worry. While we may have backslid a bit with our spending habits in December, on a whole last year we reduced our total amount of debt.
And while TransUnion’s report shows that our credit spending is up, it’s not by a lot – only 1.4%, which puts the figure at $25,960 for the fourth quarter of 2011. And while it is an increase, it still comes on the backside of three consecutive quarters beforehand, when our credit spending either remained steady or even saw slight dips. Credit spending doesn’t take things like HELOCs and second mortgages (or even a first mortgage, for that matter) into consideration; but instead focuses on personal lines of credit, auto loans, and credit card spending. A spokesperson at TransUnion also stated that this slight increase falls in line with what’s usually seen at that time of year, as people become more strapped for cash and look to things like plastic to foot the bill for holiday expenses.
The fact that these stats from TransUnion don’t take mortgages into account might still be a concern for policymakers, as it’s this form of debt they’ve been increasingly considered about. Just last week after all, they warned us that Canadians as a whole were beginning to rely too heavily on their home equity as a means of borrowing. But they can’t overlook the fact that our credit spending is down; and they should be especially encouraged by the fact that we haven’t reduced our credit debt this much since 2004 – well before the recession hit.
The only thing really worrisome here is that with Canadians cutting back so much on spending, it does mean fewer dollars going into our economy, which brings with it its own sort of trouble. But Canadians shouldn’t be too worried that dollars aren’t flowing as freely into department stores. After all, things never look good for the economy when homeowners are drowning in debt they can’t afford, either. All in all, it looks like things might start be beginning to balance themselves out; and Canadians might be in a better position than they have been in years.
