Interest rates impacting household credit conditions: economist

High interest rates are weighing on household credit conditions, which will have implications on spending, according to one chief economist.

Benjamin Tal, deputy chief economist at CIBC Capital Markets, said in a report Monday that the increased level of household sensitivity to interest rates is clear with “rapidly slowing” credit growth. He said that while the impact of the Bank of Canada’s tightening campaign may not be “fully visible yet” in labour market or headline gross domestic product (GDP) figures, the impact can be seen in household credit conditions. 

“At barely above the zero mark, the year-over-year real growth in total outstanding credit is the lowest seen since the double dip recession of the 1980s,” Tal said in the report. “It’s now well below the growth rates seen during the 2008 recession, and is a full percentage point under the growth rate seen at the depths of the 1991 recession.”

However, Tal said he sees upcoming credit losses as “manageable” and should be viewed as a “signpost of a squeeze on spending” and not as a possibly significant “credit risk event.”