Canadians leading the world in household debt

While citizens of other countries, stung by the housing crash a decade ago, have been slowly deleveraging ever since, Canadian consumers keep racking up more debt. A recent OECD report, in fact, ranks Canada as the most indebted among 28 countries surveyed. And that leaves the economy vulnerable to a shock or further increases in interest rates. Maclean’s reports:

Household debt is more than 100 per cent of GDP in Canada, according to the report, surpassing other developed countries such as South Korea, the U.S. and U.K. While most countries have seen their levels of indebtedness fall since 2007, Canada is a rare exception, digging itself deeper into the red. The OECD states the obvious: rising debt levels don’t imply immediate doom, but definitely increase a country’s vulnerability to economic shocks.

There is some indication already of a pullback in retail sales. Every quarter-point rise in interest rates shrinks the amount of disposable income going into discretionary purchases, and the effect will be long-lasting.