Although U.S. households are seeing a destruction of wealth as home prices tumble, Canadian households are in good shape financially. This bodes well for continued growth in consumer spending in 2008, suggests a National Bank Financial Ltd. report.

Canadian debt loads — mortgage and consumer debt as a percentage of net worth — remain relatively stable at about 18% and considerably less than the 1990 peak of 19.4%. In the U.S., the debt load was 23.2% in the fourth quarter of 2007, substanitally higher than the 1990 average of 16.4%.

Canadian residential net worth rose an annualized 4.7% in the fourth quarter while U.S. residential net worth experienced a record 11% drop, the third consecutive decline.

As a result, total Canadian house-hold net worth — total assets less liabilities — moved up an annualized 0.2% in the fourth quarter, the 19th consecutive increase — despite the negative impact the high Canadian dollar has had on Canadians’ U.S. holdings. In the U.S., total net worth fell 3.7% in the quarter, the first drop since the third quarter of 2002.

Canada, of course, is not insulated from the U.S. If the U.S. economy goes into a deep or prolonged recession, Canada will sell fewer goods and services there.

Should the U.S. slowdown/recession cause resources prices to fall substantially, Canada would be even more negatively affected.

But even if that were the case, Canada should fare better than the U.S. — not only because consumers are in better shape, but also because federal and provincial governments are in good financial shape, which would allow them to stimulate the economy if needed. IE