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Awaiting the prudence payback
29 July 2010
Commentary from Peter Hall, vice president and chief economist, Export Development Canada (EDC).
Read more:
[Peter Hall]
[EDC report]
[Consumer spending]
[recession]
[recovery]
Lambasting big-economy consumers for their excesses has become a popular recession-time sport. Chastened by the exposure of their self-engineered plight, many consumers have hunkered down, quietly working down excesses and deleveraging. Their activities are obvious in consumer spending data; this large chunk of the world economy has been a soft spot. Is the new prudence paying off?
One look at indebtedness data, and it doesn’t seem to be doing anything. Consumer debt as a share of disposable income is still sky-high, an ominous signal that a full consumer recovery is no slam dunk. But these data always look worst just after a recession. As incomes recover, debt ratios can improve markedly. A better gauge of...
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