"Although Canada has weathered the storm better than most, this accompanying report shows that any further slippage in the world economy holds very high risks for Canada.

High lights include:
.-Average household debt climbed to a record $96,000 per family in 2009
-Debt to family income levels rose to 145% (!), the highest ever reached since the study began and predicted to climb to 160% by 2012 if trends persist
-mortgage payments more than 90 days in arrears jumped 50% over 2008
-credit card payments in arrears three months jumped 40%
-59% of family finances were in such a fragile situation that a delay of just one week in a pay cheque would cause serious difficulties
-70% of women with young children were now working outside the home, pointing to the need for two incomes to make ends meet.
-The booming housing market was singled out as a particular area of concern, with record-low interest rates encouraging families to take on more debt than they can afford to buy a property.
-Over the past 20 years, Canadian housing prices have averaged 3.7 times household earnings. At the end of 2009, prices are closer to 5 times household earnings with real estate making up a record 48% of the net worth of Canadian households

Eoin Treacy's view Thank you for this informative email and I agree that Canada has a number of looming challenges that need to be faced. Canada has been running surpluses for a number of years and came into the recession in a relatively strong position, allowing it to run deficits for the time being in order to combat weak growth. This is a much better position than its closest neighbour but that does not negate the issues facing the country. The Canadian housing market, particularly the west coast and Ontario, is frothy but measures appear to be coming into place to cool it down. This article by Julie Fortier appeared in yesterday's Vancouver Sun and may be of interest. Here is a section:

With the Harmonized Sales Tax, which will add more tax to home buying in two of the biggest and most squeezed markets - Ontario and B.C. - set to start July 1, and the Bank of Canada's record-low interest rates expected to rise around the same time, that pace of growth could slow dramatically in the second half of 2010. Last week, Finance Minister Jim Flaherty also said starting April 19 all borrowers must meet standards for a five-year fixed-rate mortgage, even if the buyer wants a variable rate mortgage, among other mortgage rule changes.

While the interest rate cycle remains uncertain, this suggests that the government are taking steps to cool the market in an attempt to avoid a crash somewhere down the line. Canada's banks remains some of the best capitalised in the world and the country are blessed with world class resources. The latter should continue to contribute to the economy's well being and the former are not a headwind. Against such a background, Canada would need to endure a major policy mistake for the broad economy to fail to come through the aftermath of the credit crisis in relatively sound shape.

I think I should also revisit yesterday's piece on another topic. The broad brush approach to some of the economies most affected by the credit crisis neglects the fact that the USA, UK, Europe and Japan are home to companies with wide market appeal, strong cash flows and established branding that lead and dominate their sector and are leveraged to growth in the world's major population centres. Such companies are well positioned to benefit from the continued growth of the global middle class and merit consideration in a globally oriented portfolio.