Accounting for inflation, household credit likely declined over the past year, according to a research note from National Bank Financial (NBF).
Recent data from Statistics Canada showed that household credit grew 3% on an annual basis through the third quarter, which was the slowest pace in over 30 years, the report said.
On an inflation-adjusted basis, NBF estimated that consumer credit declined by 1% over the same period.
“The last time the volume of household credit contracted in our country was during the great recession of the 1990s,” it said.
At that time, “the policy rate peaked at around 14% and the unemployment rate at 12%,” it noted, adding that there’s no precedent for unemployment to remain below 6% while household credit is shrinking.
“Let’s hope that the next employment report on Friday doesn’t show too much of a deterioration in hiring, otherwise the credit cycle will continue to deteriorate,” it said.