"Unusual levels of uncertainty" dog Canadian economy
Oh, man, those household debt figures. Seems they just keep going up and up. In August, a TransUnion Credit report indicated that British Canadians carry the highest average debt loads in Canada – a whopping $38,000 in non-mortgage debt. Yesterday, Statistics Canada released a survey that put the average amount of household debt at 161 percent of annual income.
In fact, Stats Can’s figures have been revised thanks to a new accounting method that shows we’re much, much poorer than we think—up from 150 percent earlier in the year. (This figure does include mortgage debt, but does not take into effect the number of people who have effectively re-mortgaged household debt against the rising value of their homes).
In the meantime, Bank of Canada governor Mark Carney was in British Nanaimo, BC, at the Vancouver Island Economic Alliance yesterday. Canada’s morning marathoner was rather vague—perhaps uncertain is the best word—about the state of the world’s economy and Canada’s place in it.
In his opening statements, Carney observed that “…Trading volumes across asset classes have generally been low in recent months, as many market participants with large cash holdings sit on the sidelines… This apparent lack of conviction in markets can itself be considered a sign of unusual levels of uncertainty.”
Analytically, there is a clear question of causality here - does uncertainty cause slower growth or is it the other way around, with difficult economic times inducing greater qualms about the future? Surely it works both ways. Thus, the current combination of economic weakness and heightened uncertainty may be forming a vicious circle in the global economy.
Talking about China, Carney says, “The Bank of Canada expects growth in China’s GDP to average about 7.5 per cent over the next few years.” How much is a ‘few’? 3? 5? Several? Uncertain, indeed.
Carney has been hailed internationally for shielding Canadians from the worst of the worldwide depression—largely through not allowing Canadian banks to lend to high-risk individuals. However, homeowners have used increasing equity to borrow for everything from vacations to cars to – yes, those infamous ‘LCD screen TVs.’ The individual debt of Canadians is now larger than that of Americans and British citizens at the height of the recession, and it’s particularly bad in BC and Alberta.
In conclusion, Carney said: “We must take care not to allow uncertainty to dominate our actions, letting profitable opportunities slip away and, more generally, compounding the very real, but still manageable, challenges facing the global economy.”
Hmm, manageable challenges. I’ll ask my Irish friends about that.