“Positive momentum around key consumer credit trends and performance” combined to boost the index reading in the second quarter, the report said. The demand for consumer credit began to rise and credit applications reached pre-pandemic levels.
Overall, credit applications were up 5% year over year in June, led by a sharp increase in credit inquiries from low-risk consumers, TransUnion reported.
“With the economy reopening and many Canadians returning to some normalcy, we expect to see overall consumption and demand ramp up,” said Matt Fabian, director of financial services research and consulting at TransUnion, in a release.
That said, a second-quarter consumer survey showed that many remained cautious about adding to their debts, with 21% of respondents planning to apply for new credit or to refinance existing credit in Q2, down from 26% in the first quarter.
Additionally, total credit card balances declined by 3.9% year over year in the second quarter, and balances on lines of credit fell by 2.2%.
“We are seeing consumers taking advantage of their higher liquidity to pay down debt,” said Fabian. “According to TransUnion’s recent Consumer Pulse survey, 46% have reduced their discretionary spending and 20% said they paid down debt faster.”
The firm noted that, while credit origination volumes have increased, they haven’t yet returned to pre-pandemic levels.
“Growth in new credit continues to be fuelled by the mortgage market as the pandemic drove a housing market boom,” it said.
Credit performance has also remained strong, the report said. It noted that overall consumer delinquency declined by 0.63% year over year in the second quarter to 1.96%.
Future credit trends also look positive, amid continued economic recovery and low interest rates. Yet this remains subject to the trajectory of the pandemic and its effect on the economy.
“While pandemic-related threats to the economy do remain, as Canada continues to reopen, we expect consumers to increase their spending and for the recent acceleration in new credit growth to continue,” said Fabian.
“Lenders should consider ramping up their acquisition strategies and channels accordingly. Market competition for acquisition and share of wallet will be high, as debt levels remain well below pre-pandemic levels,” he added.
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
Author of the article:
Bloomberg News
Jonathan Ferro and Christopher Condon
Published Apr 18, 2024 • 2 minute read
Article content
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
Article content
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
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Article content
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
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Article content
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
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