Saturday, February 1, 2014

Rate of Debt Slowed Last Year

Canadians are more in hock than they’ve ever been, and they’re continuing to borrow more all the time. But there could finally by a light at the end of the tunnel: the rate at which they’re taking on debt is slowing, according to a report from Royal Bank of Canada
Personal debt rose by 3.9% in the 12 months ended in December, the report said. That marked the slowest annual growth since 1995. And it compared to 4.0% year-over-year growth in November, and 5.1% last December.Business lending, on the other hand, rose 7.1% in December from a year earlier, matching the rate of growth in November, but easing slightly from the 7.3% rate in December 2012. hat pattern is consistent with the hopes of the Bank of Canada and the federal government that business spending and exports will take over from households, whose debts have climbed in tandem with the country’s high-flying housing market, RBC said.
 It found some encouragement in the fact residential mortgage credit grew by 4.8% in 2013, the slowest annual pace of growth since 2000. Even with housing market activity showing resilience throughout much of the year, residential mortgage debt growth slowed to a more than decade low in 2013,” RBC said.
The scaling back in the growth of household debt will allay some worries surrounding the record levels of household debt in Canada in recent years, it said. he debt to disposable income ratio–a widely used index for the state of household debt–reached a record 163.65% in the third quarter of 2013. Some economists believe Canada’s housing market, the prime engine behind high household debt, could suffer a sharp correction.
RBC said the mild moderation in business financing suggests the “great rotation” from households to international trade and business investment will be a slow transition. With global uncertainty diminishing and financial conditions remaining accommodative, we expect the diverging trend between household and business credit growth will continue in 2014,” RBC said
Don Curren| WSJ

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