Equifax published a press release with a study of Canadian Consumer Debt in Q4 of 2013, and Canadians now carry about $1.4 Trillion dollars in Consumer debt (I believe their interpretation of Trillion is 1,000 Billion). This is up about 4.5% from Q3, so we are building up more Consumer Debt, but what does it mean?
Are we more optimistic in the economy and thus thinking we can pay off the debt? Are we still spending ourselves into oblivion? I think we will only know in a while, but still a fascinating number to consider when discussing economic health in Canada.
Where is this debt building up? Installment Loans and Credit Card had significant increases of 11.0 %, and 5.9 % year-over-year, respectively, which means we are buying more things with monthly payments and with our Credit Cards.
Why isn’t there more worry about this? Well, for one thing the delinquency rate on debt is dropping, so we can pay off our debt in a timely fashion. The following table from the report shows:
90 days or more Delinquency Rate
Region Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Ontario 1.37% 1.37% 1.35% 1.28% 1.23% Quebec 0.97% 1.00% 0.99% 0.96% 0.98% West 1.07% 1.08% 1.06% 1.00% 1.01% East 1.47% 1.50% 1.51% 1.42% 1.42% Canada 1.19% 1.20% 1.19% 1.13% 1.12%
So we seem to be paying our debt off relatively well. More interestingly, the report had a more exciting table breakdown of debt load by city:
Average Debt – % Change Year-Over-Year
Changes Year- over-Year Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Calgary -1.4% 2.1% 3.6% 3.8% 1.9% Edmonton -0.2% 5.0% 6.4% 7.5% 5.3% Vancouver 4.3% 3.2% 2.0% -0.3% -4.5% Montreal 3.3% 3.5% 4.6% 4.1% 2.3% Ottawa 3.1% 2.6% 4.2% 3.3% 2.1% Toronto 1.2% 0.7% 2.4% 1.6% 0.0% Halifax 3.7% 2.5% 3.3% 2.8% 3.0%
Way to go, Vancouverites, paying down debt so nicely!
So is the economy improving, or are we digging deeper financial graves for ourselves?
It makes me laugh, then makes me feel like vomiting, then completely terrified. I want to yell, “You bunch of idiots!!” I don’t think a statistical drop in delinquencies of 0.14% (the equivalent of $1.40 on $1000) is indicative of anything at all. Do you? Maybe there was just one really cold day and most of Canada couldn’t make it out for their Tim Hortons coffee.
Steady on there, let’s not go off half-cocked. I agree the debt load increasing is a cause for concern, and the delinquency percentage is bills that go past 90 days due, not the amount, so more folks paying things off is better, but…
From what you described I can see a few things at work, the fact that debt went up in Q4 can simply be that after a few years people went a little overboard on Christmas (I’m sure that expensive new electronics coming out around that time caused people to drop them on their cards rather than paying cash for them).
The fact delinquency rates are low and dropping is a good thing but the overall number is still daunting. It means that every Canadian has $40,000 in debt (give or take) including people who aren’t working. If there is an economic meltdown then this could be problematic. The unfortunate thing is that the lending companies want this number to keep going up.
Yes, when you have your Credit Card and Banks sending you notes about how a Nice Vacation is something I deserve, I realize just how insidious the Debt Ridden Society is these days.