Canadians have been very fortunate these past two years as Canada’s economy has done very well post recession. Employment has returned to pre-crisis levels largely due to the demand from emerging economies’ for raw materials that has been holding the economy up. The GDP has recovered more quickly than those of other major world economies. As well, interest rates and inflation rates are at all time lows.
The Bank of Canada has successively knocked interest rates lower over the past two years as a way to boost the economy. Canadians kept spending through the recession – mostly by taking advantage of these record low interest rates and piling on debt. That kept the economy going strong, but now, household debt has reached record levels.
Our domestic household debt levels hovering close to where they were in the United States prior to the financial crisis. Canadians need to start paying down debt if the economy is to continue to prosper.
Since the start of this year, Canadian consumers are cutting their spending and are borrowing less. Meanwhile interest rates will be going up – it’s just a matter of when. Analysts predict rates will start rising this fall putting more financial pressure on consumers applying the brake even more dramatically in the face of higher interest rates and increased worries about high household debt.
On the global front, the world economic picture has also become increasingly uncertain with the continuing European debt restructuring, attempts by China to tame inflation, the impact that will have on commodity prices, and the still-fragile recovery in the U.S.
In Veri-cheque’s economic overview last May 2010, I referred to the chaos in the European economy and bailout for Greece, which I described then as the tip of the iceberg. Fast forward a year to today and not only have Greece’s debt problems worsened, the economies of Portugal, Spain and Italy are also in financial trouble.
As Canadian consumers scale back in purchasing, many small businesses will be facing higher inventories and tougher economic times ahead. Protect your accounts receivable against bad debt with Veri-Cheque’s Account Receivables Protection Plan to ensure your company’s future growth and longevity. I invite you to give us a call to get more information about how we can assist with your business plans for the future.