It certainly looks like Canadian consumers are living comfortably well according to the latest data released by Statistics Canada. Retail sales hit a new high in June as data shows consumers buying lawn care goods, summer clothes, sporting goods, and general merchandise.
Retail sales rose for the sixth consecutive month, up 1.1% to $42.6 billion in June. Gains were reported in 8 of 11 subsectors, representing 71% of retail trade. In the first six months of 2014, retail sales were up 4.7% compared with the same period in 2013.
In volume terms, retail sales increased 0.6% in June making June the sixth consecutive month of rising consumer spending, according to Statistics Canada data.
What is surprising about the increase in retail sales is how it is not aligned with an increase in employment. Incomes have not increased in keeping with retail sales costs. So it must mean that people are using credit as a means of payment.
The debt to income ratio has stretched over the last year to a record high of 1.64. That means for every $1 in income earned, Canadians are spending $1.64. How is this possible? Through the use of credit. The old “buy now and pay later” idea promoted by banks and credit card companies has consumers living in debt, and vulnerable to job loss and any other cause of income loss.
Take a look at the graph below for a visual record of how the debt to income ratio has increased over the years.
Experts suggest that consumer borrowing is on the rise again. Statistics Canada reports new household debt figures on Sept. 12, which could show a rise in the debt-to-income ratio for the first time this year.
Banks and credit card companies are rubbing their hands in glee as consumers continue to use credit for making purchases and paying for them later when funds are available.
On the flip side, debt relief companies are preparing to help those indebted consumers in paying off debts that have become too much to bear. One has to wonder, when will the over spending stop?
To learn how to budget well and mange debt, visit our blog for helpful tips and informative articles. Go to www.occa.ca/blog..
Recent Comments