Canada: National balance sheet accounts getting more attention – RBC CM

Elsa Lignos, Senior Currency Strategist at RBC Capital Markets, suggests that the Canada’s national balance sheet accounts (Thu) would not ordinarily be in focus, but this release is getting more attention in the context of household imbalances.

Key Quotes

“The debt-to-income ratio is the most-watched aspect and should reach a record high of 166.3% in Q2 largely due to a 1.2% rise in total household debt in the quarter. With household assets expected to increase by 2.1% and higher financial asset valuations (S&P/TSX up 4.2%), the debt-to-asset and debt-to-net worth ratios, perhaps better measures of household indebtedness, will likely edge lower from 16.6% and 20.0%, respectively, in Q1. Bigger picture, high household debt has been highlighted by the BoC as potentially weighing on consumer spending, especially in the event of an adverse shock. It also dampens expectations for BoC easing despite some data weakness.”