TH: Canadian wealth rebounding at a faster pace than in U.S.
How wealth is rebounding
Wealth among Canadians has rebounded at a faster pace than that of our American cousins, buoyed by a strong real estate market and stronger stocks pumped up by commodities prices.
"The rollicking stock market helped boost the net worth of American households in [the fourth quarter], though they remain nearly $9-trillion (or 13 per cent) poorer than before the credit crisis because of depressed home values and the almost $2-trillion loss in equity values," economist Sal Guatieri of BMO Nesbitt Burns said in a research note.
"Conversely, Canadian household wealth continues to scale new heights on the back of record house prices and a near-full recovery in equities (thanks to the commodities boom."
Mr. Guatieri was referring to figures released yesterday by the Federal Reserve that showed household wealth in the United States rose by $2.1-trillion in the final quarter of last year. That brought the total to $56.8-trillion, the central bank said. At the same time, Americans continued to cut back their debt levels.
Mr. Guatieri was comparing the U.S. fourth-quarter data to third-quarter numbers in Canada.
BMO more confident
Sherry Cooper is growing more confident about the North American recovery, even in the face of higher commodity costs, though sharply higher, and sustained, oil prices (CL-FT102.60-0.10-0.10%) could stall the rebound.
"While we were cautiously optimistic about the economic outlook at the turn of the year, we now believe the odds have increased for a self-sustaining expansion in North America through this year and next despite the recent surge in commodity prices," the chief economist at BMO Nesbitt Burns said in a report.
"Job growth has finally picked up in the U.S. and business spending is rising. Consumers are more confident, opening their wallets for the best Christmas season in four years."
Ms. Cooper noted that both the Canadian and U.S. economies now depend much less on crude than they once did, with consumption down almost 7 per cent since 2005 and more use of natural gas.
"To be sure, however, if oil prices rise to around $130 to $150 a barrel and stay there, overall economic activity will slow and possibly head into reverse," Ms. Cooper said.
"It is unlikely, however, that policy makers would just stand by and watch it happen. Monetary and fiscal stimulus, as well as releases from the U.S. Strategic Petroleum Reserve, would likely ensue. Consequently, a full-blown recession is unlikely."
