The Monthly Muse

Brought to you by Younker & Kelly

As part of our commitment to bring you relevant economic news on a regular basis – here is the latest installment of the Monthly Muse.

Canada’s household saving rate eased to a near five-year low of 3.6 percent in the fourth quarter of 2014, the third straight quarterly decline, Statistics Canada said when it released gross domestic product data. The saving rate is defined as the ratio between net saving of the household sector and household disposable income. Many thought that low gasoline prices and still-low borrowing costs should have given breathing room to consumers in that quarter but consumers had to dip into their savings to finance consumption. All this is happening while household debt is already at a near record high. The household saving rate is the lowest since the first quarter of 2010. The current household savings rate, at 3.6 percent, has ebbed from 5.9 percent in early 2013. By contrast, in 1982, the rate was as high as 19.9 percent.

There was a poll conducted by a Toronto advertising agency Bensimon Byrne, which showed that 55 percent of consumers who responded think that the economy is in a decline. This is the first time negative sentiment has outweighed positive views in the agency’s quarterly survey since November 2009. “Essentially, Canadians are feeling tapped out,” Benison Byrne president Jack Bensimon said. Several years of a limping economy has taken its toll, he added, as people deal with stagnating wages, higher costs of necessities and higher debt levels. Ninety percent of those surveyed said the cost of living is increasing faster than their incomes. As a result of their pessimistic views, Canadians at all income levels are planning to reduce their spending, the poll suggests. This is a move that could potentially dent the economy further. Those surveyed plan to spend less than they did last year on almost all “discretionary” items, such as restaurant meals, liquor, cosmetics and vacations. They do, however, plan to spend more on essentials such as groceries, electricity, Internet fees and car maintenance.

As in our previous post we still see the growth coming in the U.S. market for this year. There are still too many unknown variables in the Canadian market to know when we will start to see some solid growth coming from the Canadian economy.

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