The focus is mostly on ever-rising household debt, but behind the scenes, with less drama, corporate Canada has been piling up debt even faster. Non- nancial corporate debt has risen by an average annual rate of just under 9% since the beginning of the recovery—3%-pts faster than the growth seen in household debt. The corporate debt- to-GDP ratio currently stands at 70%—up from 50% in 2010.
Of course everything is fine and well— until it isn’t. So should we lose sleep over corporate debt? The fear of course is that higher interest rates will expose the vulnerability of highly indebted corporations, and will put at risk the current dividend growth trajectory—mainly in high-yield sectors such as utilities, that happen to see their debt load rising the fastest.