“With the value of many assets at risk and liabilities increasing for Canadian households, the outlook for wealth looks bleak,” the report said.
Due to a solid labor market and increased wages, Desjardins anticipates that growth in disposable incomes will moderate from the extraordinarily high levels experienced during the pandemic but remain strong.
However, most of the asset growth in Canada has been in the form of rising stock and property values, both of which have been dropping as a result of increased interest rates. In the meantime, Canadians’ savings are losing purchasing power due to inflation.
“While real estate is the most important asset held by a majority of Canadian households, the debt incurred to buy that asset is also their biggest liability,” the report said. “While the value of assets can fluctuate, debt tends to stick around. Inflation does help reduce the relative importance of debt, but because it leads to higher interest rates, there will be more pain ahead.”
Desjardins stated that it anticipates consumption, a key economic engine in Canada, to decelerate this year as increased debt servicing costs and growing living expenses consume a larger share of household wages.
