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)

Why Do Men Assume They're So Great?

Katty Kay and Claire Shipman, authors of this month's Atlantic cover story, sit down with Hanna Rosin to discuss the power of confidence and how self doubt holds women back. 


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

Where Time Comes From

The clocks that coordinate your cellphone, GPS, and more

Video

Computer Vision Syndrome and You

Save your eyes. Take breaks.

Video

What Happens in 60 Seconds

Quantifying human activity around the world

Writers

Up
Down

More in Business

Just In