Canada

Canadian Household Credit Growth Has Only Been Lower One Other Period

Canadian households are showing signs they’re tapped out. Bank of Canada (BoC) numbers show the balance of outstanding credit reached a record high in November. The record is overshadowed by the continued deceleration of growth, however. Households borrowed at one of the slowest paces in decades, with big drops in consumer and mortgage growth.

Canadians Now Hold Over $2.15 Trillion In Household Debt

Canadian households set a new all-time record for the balance of household debt. Outstanding credit reached over $2.159 trillion in November, up 0.24% from the month before. This represents an increase of 3.24%, when compared to the same month last year. The total is a record, but the pace of growth has never fallen this low outside of recession.

Canadian Household Debt Outstanding, Percent Change

The annual percent change of total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

The growth pace of household debt is rapidly tapering. The 3.24% we saw in November follows 18 consecutive months of deceleration. The most recent print is also 39.02% lower than the same month last year. Canadians have only seen household debt grow this low from 1982-1983, during a particularly rough recession. In case you haven’t noticed, we’re not in a recession, so it’s a little strange and worth watching very closely.

Canadian Mortgage Debt Tops $1.53 Trillion

Most of the epic debt pile is *drumroll* mortgage debt! Canadian households owed over $1.539 trillion in November, up 0.27% from the month before. This represents a 3.2% increase, when compared to the same month last year. Once again, a record level of debt, but more important is the rapid taper of growth in this segment.

Canadian Household Debt Outstanding In Dollars

Total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

Mortgages are where the vast majority of the credit slowdown is occuring. The 3.2% is now the lowest number we’ve seen since April 2001, and it was only lower for the one month. The BoC cut rates shortly after, reversing course and sending growth higher. We have to go back to the early 1980s recession to find a period with more than one month of lower growth.

Canadians Owe $619 Billion In Consumer Credit Debt

Dismissing the fall in credit growth as just a slowdown in home sales? You need to check out consumer credit. The outstanding balance reached $619.95 billion in November, up 0.18% from the month before. This represents a 3.33% increase when compared to the same month last year. Once again, record high – but the pace of growth is experiencing massive deceleration.

Canadian Household Debt Change

Annual percent change in debt held by Canadian households.

Source: Bank of Canada, Better Dwelling.

The pace of growth for consumer credit is stalling after rapid deceleration. The 3.33% growth in November is about a third lower than it was this time last year. It’s not a record low – the 12 month change is at a level we saw just two months before that. It is showing signs of deceleration though.

Credit growth is a leading indicator, so the rapid deceleration isn’t a great sign for the economy. People are dismissing the decline a just a drop in home sales, but it’s much more broad. Consumer credit is also falling, indicating households may be tapped out. That tends to happen when an economy sees debt grow faster than disposable income for years.

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12 Comments

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  • Jason Chau 6 months ago

    Don’t listen to what people say. Watch what they do. People are pretending they’re confident, but won’t put their money where their mouth is.

    Home sales = 💩
    Car sales = 💩
    Credit growth = 💩

    • SUMSKILLZ 6 months ago

      Yup, yup. Was at my car dealer in December a few times to address a glitch under warrenty…don’t recall seeing the dealership so dead in December. Lots of familiar sales faces also are no longer at the dealer. Less new inventory on the lot too. More pre-owned product around.

  • Mary 6 months ago

    No wonder BOC revised GDP growth lower. They’re now hoping inflation is made up by a higher cost of imported goods, aka your dollar is weaker. GLTYA.

    • Trader Jim 6 months ago

      Big slowdown too. 1.7 from 2.1 in October. How do you drop a fifth of your forecast in just two months? You see something really bad, that you can’t reverse in time. That’s including the imported inflation from a weaker CAD. Important, since we import almost everything these days, since we gave up manufacturing to a country with a peg to USD.

      https://www.bankofcanada.ca/2019/01/fad-press-release-2019-01-09/

      • Grizzly Gus 6 months ago

        Who needs manufacturing when we can all just get rich flipping each other concrete boxes in the sky. I’m projecting the average condo will be worth 20 million Canadian Pesos within the next 20 years.

  • Hox 6 months ago

    Spring recovery is inevitable when it’s this low, and the economy isn’t expected to hit recession.

    • SMH 6 months ago

      Huh? I think you have a typo in your name, should be “Hoax” hahahahahaha.

      The stats on housing are making me soooo giddy, I can barely argue with permabulls without full blown laughter. LL and SCE come out and plaaaaaaay!

      • Julia 6 months ago

        Absolutely giddy, but what are LL and SCE? Google is not helping me .

        • someguy 6 months ago

          LL and SCE are TO RE bulls who’ve spent some time on this forum mocking bears. LL left a while ago, before his 0% probability event occurred, and SCE still pops by now and then to offer some poorly constructed digs at Blue.

    • Foxxy 6 months ago

      Don’t tell the economy what to do – its a free spirit, it doesn’t play by your “rules”

    • MH 6 months ago

      Here is an old but evergreen educational joke:

      Q: How does an asset lose 90% of its value?

      A: First it goes down 80%, then it falls another 50%.

      • Oakville Rob 6 months ago

        Real Estate offices could put signs in their windows announcing “50% off all listings!*”

        *Based on March 2017 prices.

        BOGO

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