Issues of debt consolidation and reduction are likely to be matters of growing importance to Canadians, as the economy grows at a slower than expected rate due in large part to “difficult labour market dynamics and ongoing deleveraging” in many of the advanced economies which are markets for Canada’s exports.
A fresh look at the state of Canada’s economy concludes that the current recovery will be “more gradual” than previously forecast, with the Bank of Canada highlighting the growing importance of “household debt considerations” to our economic bottom-line. A “more modest growth profile,” according to Canada’s central bankers, “reflects a more gradual global recovery and a more subdued profile for household spending.”
“With housing activity declining markedly as anticipated and household debt considerations becoming more important,” the Bank of Canada notes, it “expects household expenditures to decelerate to a pace closer to the rate of income growth,” while overall demand will “shift away from government and household expenditures towards business investment and net exports.”
The shift in Canada’s economic outlook has prompted the Bank of Canada to put further interest rate hikes on hold – at least, for now. “At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies, and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered,” the Bank of Canada summary concludes.
The implicit message to ordinary Canadians is that current levels of household debt put them at risk. For Canadian households with high debt levels and multiple credit facilities – credit cards, personal loans and car loans etc. – issues of debt consolidation and reduction are increasingly important as the economy slowly recovers from a recession that was fuelled, in part, by a flurry of consumer borrowing.
