Editorial: Canada’s insolvency anxiety rising

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Darker clouds are forming on Canadian debt horizons. Combined with other economic forecasts, the country could be in for rough fiscal weather sooner rather than later.

MNP Ltd. has added some numbers to the outlook that quantify the approaching gloom.

Its most recent consumer debt index (CDI) notes that Canadians’ perception of their finances is on a downhill slide and, as of late April, has sunk close to its lowest ebb since the insolvency company’s CDI tracking began in June 2017.

There are good reasons for that sobering CDI slump. Good reason No. 1: trade tensions between Canada’s two main trading partners have eroded business confidence and weakened the country’s economic growth.

Good reasons No. 2 and No. 3: a slowdown in exports and a drop in energy investments driven in part by provincial infighting and weak federal leadership.

Meanwhile, Morguard’s first- quarter 2019 economic outlook shows Q1 housing starts in Canada down 16.3% month-over-month in February as a 9.1% drop drove home sales to their lowest level since 2012.

So Canadians’ ride to Easy Street aboard the real estate bus has hit some serious potholes.

MNP’s survey of Canadians’ attitudes to their debt and ability to pay their bills and absorb an unexpected financial torpedo determined that 48% of respondents are $200 or less away from financial insolvency, and 40% are unsure whether they can cover their living and family expenses in the next 12 months without sinking further into debt.

Those concerns are based on current interest rates; any increases there and all bets are off.

The only sure bet is that a lot of Canadians have been and are living beyond their means. Global macroeconomics and Canada’s domestic challenges in diversifying trade away from the United States and China and its inability to deal with its energy economy realities mean that the country, too, is living beyond its means.

Brace for a painful rude awakening ahead on both fronts.