Latest data indicate that wide-ranging stability is promoting improved economic growth
The Canadian government’s efforts to reduce outsized home price growth over the past half-decade, all without triggering a severe correction in housing markets, is promoting greater stability in the national banking system, Moody’s Investors Service said.
The trend is also making “rapid consumer deleveraging” much less likely, thus protecting the banking segment’s asset quality.
“Although Canadian banks’ mortgage portfolios are relatively resilient, unsecured consumer exposures would generate substantial incremental loan losses under the stress of a major housing price correction,” Moody’s stated in its recent sector analysis.
“Policy decisions by the national and several provincial governments, including the tightening of mortgage eligibility requirements, have stabilized prices somewhat in recent quarters,” Moody’s added, noting that the national market will very likely enjoy a “more sustainable” price growth rate by 2020.
In its latest data release, Statistics Canada reported that the economy is seeing an improved pace of growth. Expert estimates placed growth at over 2% on an annualized basis in Q2 2019.
Fresh numbers also painted a picture of increased stability in the housing and export sectors, mainly brought about by a much stronger labour segment that saw the unemployment rate reaching a historic low of 5.6% last month.
The national economy had 27,700 new employees in May, bringing the 12-month total increase to 453,100 and representing 2.4% year-over-year growth.
Nearly 700,000 new posts across Canada have been filled over the past two years, mainly in service-related industries such as technology, transportation, and professionals. StatsCan added that the largest gains were observed in provinces that proved resistant to the recent oil sector slowdown: BC, Ontario, and Quebec.
The May 2019 data “was a good number with strong details, in contrast with pretty soft numbers in the U.S.,” Scotiabank chief foreign-exchange strategist Shaun Osborne said, as quoted by the Financial Post.
