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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