One of the biggest vulnerabilities in the Canadian economy got a bit smaller in the second quarter.
Statistics Canada reports that the amount of debt-to-household-income dipped to 158.2%, from 175.4% in the first quarter. So, for the peak months of the COVID-19 shutdown, Canadian households owed $1.58 for every dollar of disposable (i.e., after tax) income. Under normal circumstances that would be good news. But the StatsCan report also shows that the actual, total amount of debt did not change very much.
Overall, credit market debt totalled $2.33 trillion at the end of Q2, with $1.55 trillion in mortgage debt and $779 billion in consumer credit and non-mortgage loans.
On the other side of the ratio, incomes did increase slightly but that was chiefly because of government supports such as CERB. The Canada Emergency Response Benefit is due to expire in early October.
Statistics Canada notes that annual trends show that lower income households tend to have a higher debt-to-disposable-income ratio.
In his latest statement, Bank of Canada Governor, Tiff Macklem, focused on evening-out the economic inequities faced by low-income earners, women, youth and others during the pandemic and recovery. Macklem warned that uneven recessions, that affect some workers or sectors more than others, tend to be longer and leave a bigger mark on the labour market.
The central bank has left its benchmark interest rate at 0.25%. The Bank has said it will stay there until inflation is sustainably at 2%. Many analysts expect that could take until late 2022 or early 2023.