Consumer savers swamp their business brethern

Canadians appear to have been girding for a long recession, according to the savings data that is buried in the Bank of Canada’s Weekly Financial Statistics data. But all Canadian businesses have been able to do is tread water. Consider these figures (January 2008 to January 2009):

Personal Deposits

Personal Deposits (chequable): $137.1B grew to $159.3B

Personal Deposits (non-chequable): $94.6B grew to $107B

Fixed term (unsheltered): $219B to $254.4B

Total personal deposits: $528.9B grew to $604.5B

Non-personal Deposits

Chequable: $196.7B grew to $225.3B

Fixed Term: $298.8B fell to $269.8B

Total non-personal deposits: $506.2B grew to $509.6B

One might wonder if the growth in “personal deposits” came from increased bank deposits by Canadian residents (sale of public company securities?) or folks who live elsewhere in the world. Canada’s banking system is recognized as being one of the safest in the world, after all.

Here’s one fact that might hint at part of the answer. Between January 2008 and 2009, Canadian banks had net foreign currency assets of negative $24.4 billion in January 2008 (the deficit figure was almost the same in April 2007). In January 2009, they had net foreign currency assets of $9.5 billion. Whether that $34 billion swing came as a result of individuals, businesses, governments or the Saudi Royal Family is impossible for us amateurs to deduce.

The only dark cloud in the now-dated personal data is that Line of Credit balances grew by $30 billion, and credit card and personal loan balances each grew by ~$4 billion. While personal deposits grew by $74.5 billion, key household debt measures also grew by almost $40B. Still, progress though.

Although it is comforting that $1.1 trillion is on deposit with our banks, the economy depends on more than solvency in the banking system. Over the Jan. ’08 / Jan. ’09 period, businesses added only $3.5 billion of deposits, while increasing bank loans by about $3.2 billion. In the most simplistic terms, the nations’ business working capital was flat over that 12 month period (assuming other key items such as receivables, inventory and payables were stable).

It makes you wonder where all of the business profits for 2008 went. But it may partially explain why businesses are crying to Federal Finance Minister for more lending capability (see prior post “Could it be that the Banks and Flaherty are both right? part 3” January 23-09).

What doesn’t make any sense is this: if non personal deposits total $509.6 billion, and loans to Canadian businesses equalled $185.9 billion, doesn’t that imply that there is plenty of net cash available to invest in growing Canada’s businesses?

MRM