How Canada's Housing Boom Affects the U.S. Auto Market

More

Canadians emerged from the Great Recession stronger than the United States, and they're plowing that wealth into homes. Household debt as a portion of disposable income is nearing 150 percent up north, exceeding the United States for the first time in more than a decade. Canada's feeling hot!

Too hot, in fact. Skyrocketing household debt is a symptom of a confident consumer, but it's also a potential problem for Canada's central bank, which would like to cool Canada's debt appetite without stomping on its export market:

The problem is that further rate hikes increase the cost of servicing mortgages, which stretch debt-laden households. Higher rates would also attract foreign investors looking for higher-yielding bonds. That would strengthen the loonie further: It's basically at parity with the greenback, which has weakened against most currencies in the last year as the Federal Reserve pursued a loose monetary policy.

A stronger Canadian dollar would make exports pricier--especially to the U.S., Canada's biggest trading partner--and put growth at risk.

More expensive Canadian exports would particularly impact the car market, as about 40 percent of Canada's exports to the United States come from petro and auto products. Read the full story at Bloomberg BusinessWeek.

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

What Do You See When You Look in the Mirror?

In a series of candid video interviews, women talk about self-image, self-judgement, and what it means to love their bodies


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In