The Bank of Canada’s latest Monetary Policy Report is predicting a gradually strengthening of Canadian economy. In his opening announcement, Bank of Canada Governor Stephen S. Poloz says:
While the first half of the year was weak, there are clear signs of a pickup in growth. Taken as a whole, the second half should see growth in line with our July outlook, and we expect the economy will gather strength over the next couple of years.
However, the report calls out rising consumer debt mortgage debt as an issue:
Vulnerabilities in the household sector are continuing to edge higher. Although the most likely scenario is one in which these imbalances unwind gradually as the economy improves, a disorderly unwinding, such as one that might be triggered by further weakness in the
resource sector or a rapid rise in global interest rates, could have sizable negative effects on the economy.
Lower mortgage rates are contributing to strong growth in mortgage credit, especially in British Columbia and Ontario. The lower household borrowing rates are also supporting other forms of consumer credit growth and spending. As a result, the overall ratio of to disposable income has edged higher.
Looking ahead, the housing market and household indebtedness are expected to stabilize over the projection period as the economy
gains strength and household borrowing rates begin to normalize.
You can read or download the full report here, and read BOC Governor Poloz’s opening statement here.