Friday, September 25, 2009

They're tapped out

So, long time no see. Work has just been crazy the last while, and really I should be doing more now but my brain is fried, so figured why waste my time and the clients money when I could do some blogging!

There was quite a bit of news on the consumer front this past week. First we got the July retail spending report. Wasn't pretty, especially considering economists largely spent the last month telling everyone spending would be up. It wasn't. Nationwide spending was down 1.0% from June, and a mammoth 14.3% from last July... Alberta was also down, 1.1% and 9.2% respectively.

Probably a good thing people are doing something other then spending, because Thursday we heard a record number of Canadians were delinquent and/or in default on their credit card debt. Defaults hit a record level of 4.8% for the quarter (up 57% year-over-year), it was 4.96% in June alone, another record. No coincidence, personal bankruptcies were also up 41% from a year ago.

No doubt Albertan's make up more then their fair share of the aforementioned as we carry the highest per-capita and per-household consumer debt levels already. It seems as good things were, people were finding ways to spend it even faster... and now the chickens are coming home to roost.

The economic slowdown itself will be a painful lesson in itself when spending starts to slow, but as debt servicing becomes increasingly expensive that's going to cause a double whammy as that will cause further contraction... and that reduced consumption isn't going to do anything to remedy the problem in the short and medium term.

Much of our economy is based on not only high and growing salaries, but people largely living beyond their means and that can only continue while the credit flows... once that stops, it's going to be bad news all around as people not only will need to live within their means, but repay for past good living. And this could be an epidemic if the reports from last week have any truth to them saying that 59% of Canadians couldn't handle missing even a single paycheque... we could be in real trouble here folks.

And finally today the CBA came out with their July figures for mortgage arrears, and Alberta is up yet again, now sitting at 0.62%, and getting ever closer to the prior record level of 0.69%. Up from 0.60% last month, and 0.28% a year ago... also the 26th consecutive month-over-month increase.

The national average held from June at 0.42%. Saskatchewan enjoys the low at 0.23% while Alberta continues be the highest by a large margin.