Statistics Canada said on Friday that household financial assets rose for a fourth consecutive quarter and the debt-to-income ratio fell, but some economists predict that gains may slow as the economy reopens and spending will increase.

The amount Canadians owe relative to their income fell in the first quarter of 2021 compared to the end of last year, according to Statistics Canada, as growth in disposable income exceeded debt.

However, TD Bank economist Ksenia Bushmeneva said household spending could slow these gains as the country emerges from the most recent wave of COVID-19.

“Once the economy starts to reopen and spending on services – which was largely unavailable during the pandemic – picks up again, I think households will be tempted to start spending again on things like restaurant meals, clothing, ”she said in an interview on Friday,“ and a lot of those expense categories are credit card spending. ”

The past year was marked by an increase in household wealth and disposable income, which was bolstered in the first quarter of 2021 by higher wages and government support, Statistics Canada said.

Household credit market debt as a proportion of household disposable income on a seasonally adjusted basis fell to 172.3% in the first quarter, compared to 174.0% in the fourth quarter of 2020. The result means that Canadians owed $ 1.72 in credit market debt for every dollar. disposable household income.

At the same time, the household debt service ratio, measured by the total obligatory payments of principal and interest on credit market debt as a proportion of household disposable income, fell to 13.45% against 13.55% in the fourth quarter.

The drop came as the seasonally adjusted household savings rate hit 13.1% in the first quarter, down from 11.9% in the last quarter of 2020.

Statistics Canada also said households have managed to add more than $ 2 trillion in wealth since the start of 2020, helped by a strong rebound in financial markets and a boiling real estate market.

But as household debt has declined during the pandemic and wealth increases, households may soon fall back to their old ways.

“The spending and saving habits that we saw during the pandemic could start to normalize and government income support payments will start to wane,” Bushmeneva said, “so the increase of disposable income will begin to dissipate.

CIBC chief economist Avery Shenfeld said consumer activity was already heading to pre-pandemic levels.

According to an index created by CIBC that tracks trips to stores, workplaces and public transportation, measures increase after a plunge at the start of the pandemic and “return to where they were when a pandemic was around.” thing of a horror movie, ”Shenfeld wrote in a note to investors.

“The most important implication will be on overall economic growth: the more options there are to spend, the more spending we will see,” he wrote.

This report by The Canadian Press was first published on June 11, 2021.

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This story was produced with the financial assistance of Facebook and the Canadian Press News Fellowship.

Danielle Edwards, The Canadian Press



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