Senior Director of Canadian Economics
Canada: Strong Household Income Keeps the Effects of Rate Hikes Muted, for Now
Household net worth advanced in Q4, following two consecutive quarterly declines, as a rebound in equity markets more than offset the continued contraction in the value of residential real estate.
The pace of household borrowing slowed for the second consecutive quarter in Q4, as Canadians added $23.7 billion in new debt—the smallest increase since the middle of 2020.
Meanwhile, household disposable income advanced a respectable pace in Q4 (3.0%).
Thanks to the slower pace of household debt accumulation and solid income growth in Q4, household credit market debt as a proportion of household disposable income fell to 180.5 % from 184.3% in Q3.
Interest payments rose by 14.1% in Q4, surpassing the record set in the prior quarter, and were up 45% from a year earlier.. At the same time, principal payments declined.
Today’s release speaks to an economy that is defying the gravity of rate hikes to some extent.
No doubt helped to give the Bank of Canada pause when considering addition rate hikes as well.
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