Statistics Canada, shared on Wednesday, in the economic world of Canada, things got a bit tangled recently. On one hand, people owed a bit less compared to what they earn. But on the flip side, the chunk of cash they spent to cover those debts went up.
To break it down, in the third quarter, the amount Canadians owed in credit compared to their income dropped a tiny bit from the second quarter, landing at 181.6%. To put it simply, for every dollar Canadians earned, they owed $1.82 in credit during the third quarter.
Now, here’s where it gets a bit more complex Statistics Canada shared. The percentage of income used to pay off those debts went up to 15.22% in the third quarter, a little higher than the 15.08%in the second quarter. Why? Because paying off debts started growing faster than how much money people had left after expenses.
A financial expert named Carrie Freestone from RBC stated, “The debt-paying ratio is already super high and might climb even more, especially with the job market not looking so strong.”
This financial tango takes a turn because borrowing money has become more expensive. The Bank of Canada increased its main rate to control inflation, pushing up the cost of borrowing. Freestone thinks more rate hikes are unlikely, though. Why? Because Canada’s economy has been shrinking, and people are spending less.
Statistics Canada adds some more numbers to the mix: people’s take-home pay went up by 1.0%, but the debt they owe went up a bit less, by 0.8 %. Sandra Fry, a money advisor, stated “This year, the people she helps with money stress are feeling more strained than ever.”
Even though prices aren’t rising as fast, Fry’s clients still feel the pinch at the grocery store. Living costs are still a big problem, she says. She advised people need to cut back on spending or find ways to make more money.
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Statistics Canada also shares that the total value of what people own, their net worth, dropped by 1.8% to $16.2 trillion. Housing and financial markets weren’t doing so great. Real estate values fell, and both local and foreign stock markets had a rough time, with the S&P/TSX Composite Index dropping by 3%.
Maria Solovieva, an economic expert from TD Bank, stated “The financial climate got stormy in the third quarter. When you consider factors like inflation and population growth, the actual wealth each person has went down by 5% during that time.”
Even though stocks are bouncing back, Solovieva warns that if Canadian home prices keep sliding, more than 3% in the last quarter, the financial rebound might not last.
