Obvious news
Last week in Canada it was announced the country is in a technical recession.
It’s great to see Stats Can and the government come to realize what many of us have known for months. Canada is in a slump. Between trade issues, at least two sizeable wars, fuel costs and a host of other things, people are feeling the pinch. It’s not easy times for average Canadians, whereas those who peddle concepts like technical recession or play politics, their world is still okay. The cheque comes on Friday and seemingly without fail, cost of living adjustments are a matter of course.
For your average person though, outside of industries that have a measure of guaranteed earnings either through legislated need or a monopolistic circumstance, wages have not kept up with inflation.
For businesses, bad debt is climbing with customers unable to pay bills. Credit proposals and bankruptcies have started to lurch upward and with many cheap mortgages up for renewal, chances are that trend will continue.
Bad debt comes off the bottom line, meaning it affects profitability and if too much of that red ink shows up, otherwise solid companies will feel the pinch. Over our tenure we have seen that cycle a few times and it feels much like that again. Businesses of all sizes then start to tighten up a bit, ensuring cash flow and investments bear little risk.
This becomes part of the problem in the economic cycle wherein those constrictions delay investment and growth. While the banks have been great at lending money in recent times, they too might decide now is a good time to be a little more conservative with loans.
It is quite a cycle, and we are into it now. Let’s hope it isn’t too harsh.