Household debt down, corporate profits slump as Poloz takes office

“The Bank of Canada now has plenty of ammunition to justify (at long last) removing its tightening bias when it issues its latest interest-rate policy statement Wednesday morning. But it won’t. The reasons may be sound, but the timing is not,” David Parkinson wrote for The Globe and Mail published online early last week. Parkinson’s article continued, “First, the sound reasons – some of which are hot off the presses. On Tuesday, the Bank of Canada published monthly data showing that household credit in April posted its slowest year-over-year growth in 17 years. Outstanding balances in both mortgage and non-mortgage debt declined; mortgage debt is now growing at its slowest pace since 2001. The overall pace of household credit growth is now 4.1 per cent year over year – roughly half of what it was three years ago, and down from 5.4 per cent a year earlier. Clearly, the efforts by the Canadian government and the Bank of Canada to cool household debt – considered by both to be the biggest risk to Canada’s financial stability – are working. Also on Tuesday, Statistics Canada reported that corporate profits in the first quarter slumped 1.2 per cent from the fourth quarter, and 3.3 per cent from a year earlier. The lack of profit momentum bodes poorly for both employment and business investment, suggesting tenuous traction for economic growth in the coming months.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

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