Canadian Household Debt Inches Higher In 2019


Even with Canadian national wealth rising in Q1 2019, households across Canada continue to struggle with managing their debt.

Via Statistics Canada,

“National wealth, the value of non-financial assets in the Canadian economy, increased 2.3% to $11,399.3 billion at the end of the first quarter [of 2019].

This was largely due to a 27.1% increase in the value of natural resources following a 23.5% decrease in the fourth quarter of 2018, as energy prices recovered. Residential real estate edged up 0.4% in the first quarter.”

At the same time,

“The household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, edged up to 14.9% in the first quarter [of 2019], as total obligated debt payments grew at a faster pace than disposable income.”

At 14.9%, Canada’s household debt service ratio is the highest its been since the beginning of the 2007-2008 global financial crisis, when it reached 14.88% in Q4 2007.

Coincidentally, Canadian exporters have grown increasingly worried about the possibility of another global recession…

Via Bloomberg,

“Export Development Canada’s trade confidence index, a composite gauge based on a bi-annual survey of 1,000 businesses, dropped to 69.8, compared with 73.7 at the end of last year.

It’s the lowest reading since 2011 and the second lowest since the last recession a decade ago.”

Although it’s worth noting that this survey was conducted before the U.S. lifted steel and aluminum tariffs on Canada, it still raises concerns considering that Canadian exports have been on the road to recovery over the past 6 months.

Canada’s Household Debt To Service Ratio Worth Monitoring In 2019


Given the importance of the debt to service ratio in calculating whether or not an entity is capable of paying back its debt obligations, Canada’s household debt service ratio is a vital indicator for Canadian investors to watch. The fact that this figure is rising at the same time that exporter trade confidence is declining paints a troubling picture for the Canadian economy in 2019… that is, unless one of the biggest drivers of Canada’s national wealth—the natural resource sector—can continue to rebound.