Stagnant incomes push debt burden higher

flovestock

tavia grant
Globe and Mail Update
Published Tuesday, Dec. 13, 2011 8:45AM EST
Last updated Tuesday, Dec. 13, 2011 9:41AM EST

The credit burden of Canadian consumers is climbing as they take on more debt amid stagnating incomes.

The ratio of debt to personal disposable income, the key measure of where a consumer stands, hit 152.98 per cent in the third quarter from 150.57 per cent in the prior quarter, Statistics Canada said Tuesday. It’s the third quarter in a row that debt has increased.

The report comes a day after Bank of Canada Governor Mark Carney reiterated that household debt is the No. 1 domestic risk in the country, as debt burdens have surpassed levels of both the United States and the United Kingdom.

“Credit growth continues to outpace the growth of disposable income, while the continued financial market turmoil has weighed on the asset side of the balance sheet,” noted David Onyett-Jeffries, economist at Royal Bank of Canada.

About 10 per cent of Canadian households are vulnerable to an adverse economic shock according to central bank estimates, meaning they could face trouble once interest rates start to rise.

Mortgage credit rose to $1-trillion in the quarter and other consumer debt to $448-billion, the statistics agency said.

Household net worth in the quarter fell by 2.1 per cent, marking the second straight decline, as stock values more than offset the gains in house prices.

Per capita household net worth tumbled to $180,100 in the quarter from $184,700 in the second quarter, the agency said. “This marked the sharpest quarterly reduction in stock prices and per capita household net worth since the fourth quarter of 2008.”