Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

Retail sales jumped 0.7 per cent in July, to $39-billion, Statistics Canada said Tuesday. The increase surprised Bay Street economists, who were anticipating a gain of about half of what Statscan actually reported. (Deborah Baic/The Globe and Mail)
Retail sales jumped 0.7 per cent in July, to $39-billion, Statistics Canada said Tuesday. The increase surprised Bay Street economists, who were anticipating a gain of about half of what Statscan actually reported. (Deborah Baic/The Globe and Mail)

Why cheap money trumps job fears Add to ...

Canadian corporations might be spooked by dim global economic prospects, but the same can’t be said for the country’s consumers. Canadians know what to do when money is cheap: borrow some and spend it.

Retail sales jumped 0.7 per cent in July, to $39-billion, Statistics Canada said Tuesday. The increase surprised Bay Street economists, who were anticipating a gain of about half of what Statscan actually reported. The “tentative” signs of slowing in household spending that the Bank of Canada noted remain just that: tentative.

More Related to this Story

Canadians were buying cars and stuff for the homes they’ve purchased during the housing bubble. Sales at new car dealers rose 1.7 per cent in July, the first “notable” increase since the peak in January, StatsCan said. Sales at building and garden supply stores climbed 1.9 per cent, ending a string of three consecutive monthly declines. Furniture and home furnishing increased 2.1 per cent.

The consensus view about Canada’s economy is that household spending is about to tail off as households come to grips with record levels of debt. That would be good for the economy over the longer term, but it will slow growth in the short term because there’s too little demand for exports to offset any declince in consumption.

July’s retail figures won’t alter that view, but they give pause. The unemployment rate is higher than anyone would like, but the economy generally is creating jobs. Wages are rising faster than inflation. So if you have a job, and the Bank of Canada continues to keep borrowing costs at rock-bottom rates, why not keep spending while the spending is good?

The risk, of course, is that those jobs start to disappear. The recession in Europe is taking a toll on the global economy. Export orders are hard to come by, and companies could start to retrench.

But do households really factor the remote prospect of unemployment when faced with a once-in-a-life-time opportunity to buy a car or a house at minimal financing? Not when the sun is shining in July.

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories