With the economy in Canada still in an unsettled space (like much of the world) people are pointing out the measurements for disposable income and debt as a signpost for how the economy is doing. In this blog, we’ll share information we gathered from The Globe and Mail and Bloomberg Canada regarding a resident’s financial health.
A telling ratio
First, let’s talk about this particular measurement. Statistics Canada calls it the household debt service ratio, and it takes the total disposable income a person has and then gives a percentage to debt payments within that portion of their income. According to the latest report from Statistics Canada, the household debt service ratio is at 15.22%. That is up slightly from 15.08% in mid-2023, but it’s also the highest ratio since this stat was started in 1990.
A look at how disposable income vs. debt has risen is telling. Its lowest point was at 10.8% in 1994, while it hit 15% in both 2008 (during a worldwide recession) and 2020 before it fell to 12.6% during the pandemic.
Difficult to predict
What does this mean to a household in Canada? Commonly, it means that more families are facing debt that is growing at a higher rate than disposable income. With a flattening in the hiring market as cited by the Royal Bank of Canada earlier this year, it also means that the ratio may climb even higher if income increases are unlikely.
It also means that with overall prices still high, there will probably be more cutting back on spending from families. If that does take place there’s a chance the household debt service ratio would fall again, as it has in waves in the past.
Either way, it’s good to know that many Canadians are still feeling stressed about debt and finances, which will likely affect the way they approach businesses. It’s a time when customer service and empathy should be top-of-mind for most companies.
Making empathy a part of business practice
Treating everyone with compassion and understanding starts with the customer service relationship, and it’s the place where building trust can be practiced daily. That relationship is at the heart of what ARO does for businesses across Canada.
We can reconcile customer debt with the personal touch needed to create a solid customer experience. It also results in better outcomes for everyone involved. Find out more about what we have to offer businesses on our website.