Canada’s Gross Domestic Product came in stronger than expected for the second quarter, but market watchers still expect the Bank of Canada to continue cutting interest rates.
Statistics Canada reported Friday that Q2 GDP rose by 2.1%, topping the 1.5% forecast by the central bank. But a slowdown in growth late in the quarter and a continuing decline in per capita GDP has analysts predicting another quarter-point cut in the Bank’s trend-setting policy rate this week. The rate currently stands at 4.50%.
Further rate reductions are good news for debt-laden Canadians who continue to show signs of financial strain from high inflation and interest costs.
The latest consumer credit report from Equifax shows debt levels and delinquency rates are up. In some cases, the year-over-year changes seem shocking, but the overall numbers are not as startling.
Equifax reports consumer debt in Canada hit $2.5 trillion in Q2, up 4.2% from a year earlier. Outstanding credit card balances rose 13.7% y/y to $122 billion. On average, card holders carried a balance of more than $4,300. Mortgage holders saw their balances increase by 12% y/y while non-mortgage holders experienced a 7.7% hike.
The delinquency rate jumped 23.4% y/y but the overall, non-mortgage delinquency rate is 1.4%. The overall mortgage balance delinquency rate is just 0.16%, which is lower than pre-pandemic levels.