A collision of two statistics regarding Canadians’ spending habits might indicate tough times are coming.
Late last week, credit-reporting company TransUnion released a report that showed the average Canadian’s debt load is $26,221 — that doesn’t include any mortgage and it’s 2.41 per cent more than a year ago.
It’s also the highest debt per capita that TransUnion has counted since it began compiling the numbers in 2004. Even more than in 2008, when the global economy tanked.
Put that trend beside another statistic and a cautionary picture of Canadian consumers begins to take shape.
Statistics Canada’s retail sales tally for June shows an unexpected drop in spending. The number might not seem big — 0.4 per cent less spending in June than in May — but considering it was expected to go up by 0.1 per cent, the downward slide should have shop owners watching closely.
So how is it our debt is going up if we’re not spending as much in Canadian stores? Cross-border and online shopping could be factors, along with store closures and consumer cutbacks.
As Canadians, we tend to be cautious spenders. We tend to be savers. But we’re slipping. Our financial conservatism is being eroded as incomes struggle to keep pace with the cost of living.
Low interest rates are helping keep the cost of loans down, but they won’t stay down forever. A sudden economic change could see interest rates leap upward, and all those people who owe thousands of dollars could be stuck.
Even the Bank of Canada has said household debt is the top domestic risk to the economy. Canadians have to remember low interest doesn’t mean no interest, just as careful budgeting doesn’t mean stop spending. Living within our means is an important tenet, especially with per-capita debt loads on the rise.
It’s a good time for Canadians to take another look at their household budgets and see if there are ways to better balance the books.
Kamloops Daily News