MNI DATA IMPACT: Canadian Q3 Incomes Up 9.2% on Relief Cash

Canadian third-quarter household income was higher than before the Covid-19 pandemic hit, up 9.2% from last year as people returned to work and the world's biggest relief checks helped others, federal figures showed Friday.

Canadians also still have CAD57 billion in short-term savings, down from a record CAD90 billion in the second quarter. The savings rate is still historically high at 14.6%, though down from a record 27.5% in the second quarter.

Government payouts limited what was the worst economic downturn since the Great Depression and officials have pledged another CAD100 billion of stimulus even after the job market recovers. That's a big reason the Bank of Canada has already scaled back the pace of QE and is talking about options to eventually do away with it, along with signs a vaccine will be widely available next year.

"There remains uncertainty surrounding the Canadian economy as COVID-19 infection rates rise and some regions enter lockdowns" again, Statistics Canada's report said.

While after-tax income was down 3.1% from the second quarter, that's tiny compared with the 50% drop in unemployment benefits being paid out as employers hired back more than 95% of those laid off during the spring lockdown.

HOUSING BOOM RETURNS

Household finances also saw a boost from rising prices for homes and a rebound in the stock market that lifted the value of mutual funds, according to the Statistics Canada report. Household net worth rose another 3% in the third quarter following a record 5.3% jump in the second quarter.

Many consumers were confident enough financially and with social distancing rules to shop for a home again. The value of existing home sales jumped 60% from a year earlier, the most since 2009, and mortgage borrowing climbed to another fresh peak.

Canada still is at risk from a long housing boom that has driven up the share of heavily indebted households. The closely-watched ratio of household debt to disposable income rose to 171% from 163%, and consumer debt of 113% of GDP is up from 106% a year ago.

"The longer-run concern remains how highly indebted consumers will react to rising borrowing costs once monetary and fiscal stimulus eventually recedes," Royal Bank of Canada economist Rannella Billy-Ochieng wrote in a research note. The central bank has signaled it won't raise its 0.25% interest rate until into 2023 when the economy returns to potential.