Living in B.C. has its cultural, environmental and lifestyle perks. But British Columbians seem to be enjoying their life today at the expense of their future.
For years, B.C. residents appear to be spending more than they earn, by between 2% and 4% a year, since 2007.
That either means households are tapping into already meagre savings or going into debt to pay for current purchases.
That kind of spending might have helped bolster B.C.’s economy, which has recovered from the global slowdown relatively well. According to Statistics Canada, B.C. retail sales have hovered near record territory of around $5.1 billion per month since September 2011.
But half a decade since the financial crisis, with households carrying record levels of consumer debt, facing muted prospects for income growth and steady increases in the cost of living, another major economic shock could lead to a more difficult recovery when another “big one” hits.
With all the brouhaha over miners coming from China to work in B.C., consumers on this side of the Pacific could nonetheless learn from their counterparts in the Middle Kingdom.
The latest International Monetary Fund data noted that even though total household spending in China grew faster than any other major economy in 2011, household savings have increased at the same time. China’s rural households saved a quarter of their income, while urban householders saved nearly a third.
The IMF report noted that China’s growing domestic market has come from an expanding middle class rather than any increase in average spending per household.
China’s families still save, despite rapid modernization, because the country still suffers from rapid jumps in the cost of living and has only a rudimentary social safety net. Fear of not having enough money to pay for necessities has kept spending muted.
With the Conference Board of Canada noting that Canada has not improved its record of household poverty, it would seem prudent to save for when the next economic shock and global crisis hits our super natural shores. •
