U.S household debt levels are starting to improve after a few years of deleveraging. This bodes well for the U.S. economy and for the rest of the world, despite the financial crunch in Europe. As you know Canada weathered the financial crisis well but because the U.S. is one of this country’s major trading partners and its economy tanked, Canadian manufacturers have had to seek new markets in Europe and Asia.

While that has kept the Canadian economy buoyant, the news coming out of the U.S. bodes well for the future of the Canadian economy.

 An economic update by Benjamin Tal, deputy chief economist for CIBC, found that the deleveraging the U.S. has been living through  since 2009 has resulted in consumer debt less than 15% below its peak in 2008. Although much of that has been due to bank write-offs, American households have also adjusted the way they view debt by reducing their reliance on credit. But now, it looks as if American consumers are willing to try on new credit. As Tal wrote, “The surprise will be how quickly debt will start oiling the rusty domestic U.S economy – just in time for big fiscal drag of 2013.”

Since 2009, consumer non-mortgage debt in the U.S. was increasing by close to $200 billion a year. Then in 2009 and 2010, due to the high number of defaults, banks started tightening their lending and consumers stopped borrowing altogether. For an economy to function, money needs to keep moving.

There has been a rise in credit enquiries recently – a strong signal that consumers are testing the credit waters again. And now with defaults back to normal, the banks are more willing to extend that credit.
It means that American consumer confidence is rising and that Canada is well-positioned to benefit financially from the increase in consumer spending.

The U.S. and Canada are strong trading partners and a recovery in the U.S. is key to improving our economy. Canada exports 30% of its gross domestic product and almost 70% of Canadian exports are to the U.S. and this relationship supports millions of jobs each year. The news on the job front has been good for the U.S. as well with the unemployment rate down.

This is all good news for Canadians. We have survived and managed to thrive through the worst of the financial crisis, even when economies in countries around us were, and in the case of some European countries, continue to falter.  We can look forward to continued economic growth for the next few years.