Recent data from Statistics Canada suggests that household net worth declined relatively uniformly across the country. However, given Canada’s regional differences, that pain isn’t being shared equally, suggests a new report from National Bank Financial Inc.
The national statistical agency published new data this week indicating that household wealth dropped by 6.5% in the second quarter, with little regional variation: the declines ranged from 6.2% in Saskatchewan to 6.7% in Alberta. However, the data also showed that net worth declined more in poorer and younger households.
National Bank pointed out that despite the similar rates of wealth destruction, the level of wealth varies widely across the country: “average household net wealth in Ontario or British Columbia is nearly double that of Atlantic Canada,” it said.
In part, this reflects the different regional real estate markets. That means that “rapid-fire rate hikes and a fundamental re-pricing of credit can bind more forcefully in relatively high-leverage jurisdictions, where caution is increasingly the watchword,” it said.
Declining wealth is likely to weigh more heavily on consumer confidence, spending and hiring in regions with higher debt loads, the report suggested.
“That’s part of a generally more sombre economic outlook that could see the Bank of Canada pivot to rate cuts quicker than some might have thought, particularly if inflation comes off the boil the way we believe it soon will,” it said.
Additionally, rising populations in Ontario and B.C. “give reason to be optimistic about the longer-term resilience of consumption and housing once policy is steered into more neutral territory,” it said.