Statistics Canada said on Friday that household financial assets rose for a fourth consecutive quarter and the debt-to-income ratio fell, but some economists predict that gains may slow as the economy reopens and spending will increase.

The amount Canadians owe relative to their income fell in the first quarter of 2021 compared to the end of last year, according to Statistics Canada, as growth in disposable income exceeded debt.

However, TD Bank economist Ksenia Bushmeneva said household spending could slow these gains as the country emerges from the most recent wave of COVID-19.

“Once the economy starts to reopen and spending on services – which was largely unavailable during the pandemic – picks up, I think households will be tempted to start spending again on things like restaurant meals, clothing, ”she said in an interview on Friday,“ and a lot of those expense categories relate to credit card spending.

The past year was marked by an increase in household wealth and disposable income, which was bolstered in the first quarter of 2021 by higher wages and government support, Statistics Canada said.

Household credit market debt as a proportion of household disposable income on a seasonally adjusted basis fell to 172.3% in the first quarter, compared to 174.0% in the fourth quarter of 2020. The result means that Canadians owed $ 1.72 in credit market debt for every dollar. disposable household income.

At the same time, the household debt service ratio, measured by the total obligatory payments of principal and interest on credit market debt as a proportion of household disposable income, fell to 13.45% against 13.55% in the fourth quarter.

This decline came as the seasonally adjusted household savings rate fell to 13.1% in the first quarter, from 11.9% in the last quarter of 2020.

Statistics Canada also said households have managed to add more than $ 2 trillion in wealth since the start of 2020, helped by a strong rebound in financial markets and a boiling real estate market.

But as household debt has declined during the pandemic and wealth increases, households may soon fall back to their old ways.

“The spending and saving habits that we saw during the pandemic could start to normalize and government income support payments will start to wane,” Bushmeneva said, “so the increase of disposable income will begin to dissipate.

CIBC chief economist Avery Shenfeld said consumer activity is already heading to pre-pandemic levels in the United States and those same trends are expected to emerge in Canada.

According to an index created by CIBC that tracks trips to stores, workplaces and public transportation in the United States, measures are increasing after a plunge at the start of the pandemic and “are returning to where they were when they were. a pandemic was something out of a horror movie, ”Shenfeld wrote in a note to investors.

“The most important implication will be on overall economic growth: the more options there are to spend, the more spending we’ll see,” he wrote.

RBC economist Claire Fan echoed the sentiment, saying the company had forecast a significant increase in spending on services, especially in households with “pent-up demands.”

“This is a pretty huge amount that they’ve accumulated throughout 2020, so they will have purchasing power to really spend on services like restaurants, hotels, international travel, once those services start. to open later in the year, “Fan said in an interview on Friday.

And like Bushmeneva, Fan has said she expects growth in household wealth to start slowing and eventually stabilize at prepandemic rates as the economy opens up.

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economy