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The following website is from the Office of Consumer Affairs about chapter 7. Consumer debt and its trends over the years, the use of credit cards and interest rates is also briefly described.  It discusses how the use of consumer credit has changed and how some people believe it is this easier access to larger debt that leads to more bankruptcies.

I chose this website because it is from the Canadian Government and can be trusted to be accurate. Furthermore it does a good job of explaining some of the intricacies of consumer credit in ways that wont overwhelm or bore the average reader. I found it interesting how people have shown through trends that they are more comfortable using consumer credit and having larger amounts of debt than they were in previous years.

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Consumer Trends Report - Chapter 7: Consumer Debt - Office of Consumer Affairs

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Consumer Trends Report - Chapter 7: Consumer Debt

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The website that is linked below discusses various economic factors over the past three decades.  It uses a lot of graphs and illustrations to portray the trends over the decades.  Figure 10 I found to be the most interesting, it illustrates consumer credit as a percentage of disposable income, I found it interesting how this day in age more and more of our disposable income is being tied up in consumer credit.

I chose this website because I think it is always important to learn from history, even if we as a society tend to repeat our historical mistakes. Additionally it appears to be a collection of public documents which would imply more reliability in the data.

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Three Decades of Economic and Financial Change in Canada: 1969 to 1999 (PRB 01-5E)

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When consumers and companies burrow, the economy benefits

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When consumers and companies burrow, the economy benefits

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This website was selected because it comes from a reputable source, the Financial Post.  It discusses the interest rates and growth rates of certain types of burrowing.  I found it interesting that the growth rate of long-term debt is growing at its fastest pace since 2004, it could be a sign that the economy is doing well and that companies may be preparing to increase growth and production.

The website can be a little dry since it only discusses interest percentages and growth rates, but it is all important information since it directly effects the economy and our day to day lives.

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OTTAWA - Just like cholesterol, there is such a thing as good debt and bad debt. It all depends on the relative health of companies and consumers, and who they are consulting.

While credit growth among Canadian households and businesses edged up in March, the appetite for residential mortgages has stabilized at the same time as the frenzied housing market is showing signs of moderation.

That's good news. At least consumers are still borrowing and spending - albeit with more discipline, even if they have added some extra weight to their bottom line. The same goes for companies, who have steadily raised their financing levels over recent months.

Overall household borrowing grew in March at a year-over-year rate of 4.1%, up from 4% in February, according to a study by RBC Economics, released Tuesday.

Residential mortgage growth was unchanged at 5% in March for the fourth consecutive month, RBC said. Outstanding balances of non-mortgage loans - such as credit cards, personal loans and lines of credit - rose 2% in March from a year earlier, following increases of 1.7% in January and 1.9% in February.

"Residential mortgage growth has stabilized in recent months and upside risks of renewed momentum are likely to be contained as housing activity is forecast to gradually moderate after a prolonged period of robust price and sales gains," RBC said.

A brief period of financial frugality seems to be ending as consumer credit growth is on the rise

"In contrast, the emergence from cycle-lows for consumer credit indicates households have increased their appetite for non-mortgage loans," it added. "With offsetting effects, overall low rates of household credit growth will likely be sustained."

Now the bad news, if indeed it is.

"A brief period of financial frugality seems to be ending as consumer credit growth is on the rise," RBC warned.

"After expanding at its slowest rate in two decades late last year, the first quarter of 2014 has seen the pace pick up."

All combined, the evolving scenario would see the Bank of Canada holding the line on its trendsetting interest rate at 1%, where it has been since the last hike back in September 2010.

Bank governor Stephen Poloz has been keeping his options open - in other words, not signaling whether the next rate move will be up or down - as he monitors currently low inflation trends for signs of welcome price increases, which would signal strengthening economic growth.

In that case, most economists expect the bank's next move will be a rate increase, most likely in mid-to-late 2015.

Avery Shenfeld, chief economist at CIBC World Markets, also sees higher borrowing costs on the horizon, but seems less concerned about household and corporate debt levels along the way.

"Used judiciously, debt is the lifeblood of economic growth," he said in a report, also released on Tuesday.

"Growing economies depend on leverage, particularly in the early stage of a cycle when it helps kick-start the job and income gains that can later step in to fuel spending."

Facetiously titled, Debt is Not a Four-Letter Word, Mr. Shenfeld suggests Canada is "long past the peak lift from government and household leverage. There's no reason to raise alarm bells over household debt."

"Those prudent Swiss, for example, carry a higher debt-to- income ratio with no clear signs of trouble. But a diminished appetite for additional consumer leverage, and a [Canadian government] regulator that is poised to step in again should house prices and mortgage debt not slow on their own, will be growth hurdles ahead," Mr. Shenfeld points out.

"While Canadians worry about too much household debt, what the economy really needs is an appetite for taking on debt and risk at the corporate level," he adds.

"Encouragingly, growth in long term debt is running at its fastest pace since 2004, and overall business credit growth is running at over 7%. That war chest could be a sign that businesses are preparing to step up, but it has yet to show up in their capital spending plans in Canada."

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Appetite for debt: How the economy benefits when consumers and companies borrow more

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OTTAWA - Just like cholesterol, there is such a thing as good debt and bad debt. It all depends on the relative health of companies and consumers, and who they are consulting. While credit growth among Canadian households and businesses edged up in March, the appetite for residential mortgages has stabilized at the same time as the frenzied housing market is showing signs of moderation.

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Total Financial Assets of Interest Payment based companies

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Total Financial Assets of Interest Payment based companies

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As you can see from the image linked below, the dark blue is representing the total assets of consumer and business transportation leasing companies. As you can see the consumer portion dominates the graph and is responsible for the assets of non-bank intermediaries.

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The image that is linked below, illustrates that in recent years interest rates are rising sharply.  That is not the focus of why I choose this image, this image shows the contribution of each source of interest rate and as you may notice the largest contribution is from consumer interest payments on consumer debt.  The larger the contribution the more important that source of interest is for the economy.

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The Benefits of Consumer Credit on the Economy 

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The Benefits of Consumer Credit on the Economy 

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I chose this website because it is specifically about the Canadian economy and how it benefits from consumer credit, specifically from credit cards, which is a huge part of consumer credit.  I found the graph contained on the website to very helpful, the graph the Canadian household credit growth and as you will notice, consumer credit sometimes and in fact usually is above the average total household credit.

The website discusses the importance of consumer credit on the economy, consumer credit plays such a crucial role in the economy that if consumers stop spending it could lead to unemployment rates going up and possibly recession. While the website focuses on the importance of consumer credit, it does mention how it is important to spend within reason and responsibly.

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Consumer spending is vital to the economic growth of nations worldwide, Canada included, as long as we don't find ourselves in over our head. While corporations are often chastised for holding a record amount of cash on their balance sheets, it's actually consumer spending that accounts for the lion's share of economic growth. Let's take a closer look at Canada's latest consumer debt numbers from RBC Economics and what they mean to the future of our economy.

Mortgage and Non-Mortgage Debt

There are two main types of consumer debt: mortgage and non-mortgage debt. If you're like most Canadians and you aspire to one day own a home, you'll most likely need a mortgage. Residential mortgage debt includes mortgages with the big banks, as well as non-bank lenders and securitized mortgages. Non-mortgage debt includes all other types of consumer debt, including installment and revolving credit. Common examples of non-mortgage debt are credit cards, lines of credit, and personal loans.

Consumer Debt: By the Numbers

Household credit grew in April by 4.0 per cent year-over-year, following increases of 4.1 per cent in March and 4 per cent in February, according to RBC Economics (Source: RBC Economics - Canadian Credit PDF).

With home prices heading for the stratosphere, residential mortgage growth continues to outpace household credit, as homeowners take on larger mortgages. Residential mortgage growth edged down slightly to 4.9 per cent year-over-year in April, after four straight months of 5 per cent growth.

"Residential mortgage growth has stabilized in recent months and upside risks of renewed momentum are likely to be contained as housing activity is forecast to gradually moderate after a prolonged period of robust price and sales gains," RBC said.

The outstanding balances on non-mortgage debt, including credit cards, lines of credit, and personal loans grew by a modest 1.9 per cent in April year-over-year, following increases of 2 per cent in March and 1.9 per cent in February. When we drill down the numbers even further, we discover that while personal loans are up a whopping 11.8 per cent in April year-over-year, lines of credit and credit card debt are actually down 0.5 per cent and 1.4 per cent, respectively.

"In contrast, the emergence from cycle-lows for consumer credit indicates households have increased their appetite for non-mortgage loans," RBC said. "With offsetting effects, overall low rates of household credit growth will likely be sustained."

Why Consumer Spending Matters

GDP - short for Gross Domestic Product - is a measure of the market value of all final goods and services produced in a country. In developed countries like Canada, the United States, and the United Kingdom, GDP growth is primarily driven by consumer spending. In Canada household final consumption expenditure accounted for 57 per cent of our GDP, according to the World Bank.

A country's GDP figure is often used as a barometer for the overall health of its economy. When consumer spending grows steadily upward, it's usually indicative of a healthy economy. It's important for consumers to keep spending; any slowdown in consumer expenditures will be felt throughout the economy and can lead to higher unemployment rates. With sub-three-per-cent GDP growth forecast for the foreseeable future, it will be challenging for the Canadian economy to grow, especially if households stop spending and taking on debt.

Although consumer spending is important, there can be too much of a good thing. If consumers find themselves saddled with too much debt, it can lead to a slowdown in consumer spending and an uptick in bankruptcies and overall delinquency rates. The Bank of Canada has kept the overnight lending rate frozen at 1 per cent for nearly four years to help encourage consumer spending. If consumer spending slows to a crawl, it can lead to job loss and eventually a recession.

The Bottom Line

Consumer spending is an integral part of a growing economy. If consumers stop spending, it can lead to all sorts of unpleasant consequences, including unemployment and a recession. Through monetary policy, governments can encourage consumers to continue to spend by lowering interest rates and tax rates. Just remember to spend responsibly; only spend money you'll be able to repay when your bill comes due.

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How the Canadian Economy Benefits from Consumer Debt, CreditCardsCanada.ca

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Consumer spending is vital to the economic growth of nations worldwide, Canada included, as long as we don't find ourselves in over our head. While corporations are often chastised for holding a record amount of cash on their balance sheets, it's actually consumer spending that accounts for the lion's share of economic growth.

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The Importance of Consumer Credit on the Canadian Economy

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The Importance of Consumer Credit on the Canadian Economy

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For this assignment I have chosen to pick the topic of the importance of consumer credit on the economy with a focus on the Canadian economy. Readers can expect to learn more about consumer credit and how it affects the economy and the importance it plays.