Only two sectors make up nearly 60% of loans
Canada’s debt market continued to grow in the third quarter of 2024, but the pace of expansion highlighted ongoing economic uncertainty, according to BDO Canada.
Year-to-date loan issuance hit $1.35 trillion, reflecting a 6.7% rise from the same period in 2023.
This growth was primarily driven by demand for new loans, but the broader lending environment remained sluggish, mirroring challenges faced by key sectors of the economy.
Real estate and financial services led borrowing activity, with retail, wholesale, and professional services rounding out the top contributors. Together, these sectors accounted for nearly 60% of total lending.
Weak demand and slow sales continued to weigh heavily on business sentiment, particularly in sectors like transportation, logistics, and manufacturing. These industries faced reduced demand for materials and machinery, compounded by tighter financing conditions. Many companies opted to repair or replace equipment rather than committing to significant capital expenditures, further reflecting the cautious economic mood.
Interest rate cuts also played a significant role in shaping the lending environment, as per BDO Canada. In October, the Bank of Canada (BoC) reduced rates by 50 basis points following a similar move by the US Federal Reserve in September. Although these cuts were aimed at spurring economic activity and keeping inflation near 2%, questions lingered about whether earlier action might have softened the blow to sectors struggling with higher rates, such as real estate and consumer-driven industries.
With further rate cuts expected in the coming months, businesses and policymakers alike are watching closely to see whether the debt market can gain momentum in a still-fragile economic climate.
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