XPost: can.politics, bc.politics, mtl.general   
   From: Harry@tweaknews.eu   
      
   March 3, 2015   
      
   Household saving rate nears five-year low as financial risks increase   
      
      
   Household saving rate is the lowest since the first quarter of 2010. The   
   current household saving rate, at 3.6 per cent, has ebbed from 5.9 per   
   cent in early 2013   
      
   Fissures are starting to show in the Canadian economy, and they're not   
   just from oil prices.   
      
   Canada's household saving rate eased to a near five-year low of 3.6 per   
   cent in the fourth quarter of 2014, the third-straight quarterly   
   decline, Statistics Canada said Tuesday as 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.   
      
   Consumers have long buoyed Canada's economy. In the fourth quarter, the   
   country's GDP expanded by a 2.4-per-cent annual pace, topping forecasts   
   though slower than the 3.2-per-cent rate of the prior quarter. Consumer   
   spending along with a buildup in inventories underpinned growth.   
      
   Lower gasoline prices and still-low borrowing costs should have given   
   breathing room to consumers in the quarter. Instead, they had to dip   
   into their savings to finance consumption. At the same time, household   
   debt is near a record. As a result, Canadians are getting squeezed,   
   leaving them with little to cushion against an unexpected event, such as   
   a job loss.   
      
   "The decline in the savings rate to the lowest since 2010 is ... not   
   good news for consumption this year," said Krishen Rangasamy, senior   
   economist at National Bank Financial.   
      
   The report comes as the Bank of Canada is set to announce its rate   
   decision Wednesday.   
      
   Most analysts expect the central bank will stand pat after it   
   unexpectedly cut its key lending rate in January.   
      
   The central bank, which cautioned that lower oil prices will have an   
   "unambiguously negative" impact on the Canadian economy, is trying to   
   balance that against the indebtedness of Canadian households.   
      
   Lower oil prices mean lower Canadian income, Bank of Canada Governor   
   Stephen Poloz said last week, adding that the oil-price shock will   
   worsen the debt-to-income ratio of households, "thereby increasing   
   financial stability risks."   
      
   Business investment and trade, two areas the central bank is counting on   
   to propel growth going forward, both slumped in the fourth quarter.   
      
   Given that the Canadian dollar has weakened further since then, making   
   Canadian exports more competitive, the sector "should eventually be   
   poised for a revival if global demand does not falter," noted Arlene   
   Kish, senior principal economist at IHS Global Insight.   
      
   For now, the buildup in inventories "doesn't bode well for production   
   and hence growth in early 2015," Mr. Rangasamy said. That, combined with   
   an expected slowdown in consumption, point to soft growth in the first   
   half of this year, he added.   
      
   Momentum will also slow as the impact of lower oil prices starts to bite.   
      
   "The true damage to the Canadian economy caused by crude's collapse will   
   only be understood in upcoming data releases given the lags involved in   
   employment and capital spending," CIBC economists Avery Shenfeld and   
   Nick Exarhos noted.   
      
   The household saving rate is the lowest since the first quarter of 2010.   
   The current household saving rate, at 3.6 per cent, has ebbed from 5.9   
   per cent in early 2013. By contrast, in 1982, the rate was as high as   
   19.9 per cent.   
      
   For last year as a whole, household disposable income – in current   
   dollars – grew 3.4 per cent, the slowest pace in five years, the agency   
   said. Consequently, the household saving rate ebbed to 4 per cent from   
   5.2 per cent a year earlier. That decline came in the same year that the   
   household debt-to-income ratio rose to a record 162.6 per cent.   
      
   All told, Canada's economy grew 2.5 per cent last year, the strongest   
   showing since 2011. Ms. Kish, at IHS, believes growth this year will be   
   "considerably" lower than last year's pace.   
      
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