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National balance sheet accounts

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Third quarter 2008  (Previous release)

Canadian stock prices fell significantly during the third quarter of 2008, resulting in a 3.2% drop in household net worth, equivalent to a decline of $191 billion. This was the largest percentage drop since the third quarter of 1998, when Canadian stock prices fell in response to the Asian financial crisis.

Chart 1
Household sector assets decline

In comparison, household net worth in the United States fell 4.7% in the third quarter, their fourth consecutive quarterly decline.

Canadian equity markets were down by over 18% in the third quarter, as measured by the Standard and Poor's / Toronto Stock Exchange composite index, which closed in September at 11,753, led by substantial declines in energy stocks. The corresponding loss in directly held equities, combined with the related loss in the value of pension and life insurance assets of households, was the principal factor behind the drop in net worth. Also contributing were slower growth in residential real estate values and continued household borrowing. Total household assets fell 2.2% in the third quarter of 2008.

Household debt growth slowed in the third quarter, owing largely to lower new mortgage borrowing. Household debt (consumer credit and mortgages) relative to net worth edged up during the quarter. Households had 20.9 cents of debt for every dollar of net worth and $1.27 of debt for every dollar of disposable income.

Note to readers

The national balance sheet accounts are comprised of the balance sheets of all of the sectors of the economy: the persons and unincorporated business, corporate, government and non-resident sectors. They cover all resident non-financial assets and all financial claims and associated liabilities outstanding in all sectors.

National wealth is the sum of non-financial assets (produced assets, land surrounding structures and agricultural land) in all resident sectors of the economy.

National net worth is the sum of the net worth of the persons and unincorporated business, corporate and government sectors. Alternatively, it is national wealth less net foreign liabilities (i.e., what is owed to non-residents less what non-residents owe to Canadians).

Canadian household debt in this release is defined as consumer credit and mortgage debt of the persons and unincorporated business sector, which includes non-government non-profit institutions serving households. Household debt for the US is comprised of consumer credit and mortgage debt as published by the Federal Reserve Board for Households, Non-Profit Organizations and Nonfarm Noncorporate Business.

Quarterly series, both book and market value, are available from the first quarter of 1990. Marketable securities are at market value unless otherwise stated. For more information on the market value estimates, consult the Balance sheet estimates at market value page of our website.

Additional sub-sector tables for the national balance sheet on a market value basis are now available on request (613-951-3640; The sub-sectors covered will include a number of institutional investors, such as life insurance and pension funds, mutual funds, and chartered banks and near banks. These tables will provide the same level of detail as existing market value tables, in terms of financial instruments presented, and will cover the first quarter of 1990 to the third quarter of 2008.

However, the increase in household debt relative to net worth was larger in the US in the third quarter. While this ratio has followed a similar pattern in both countries from 1990 to 2008, it is currently lower in Canada, having diverged significantly between 1999 and 2003. This divergence was largely due to the differential effect of the stock market downturn on equity assets during that period, given the US household sector's higher exposure to traded equities as compared with that of Canada's. Mortgage borrowing was also a contributing factor. Between year-end 1999 and 2003, household mortgage debt in the United States rose 52%, compared with an increase of 23% for Canada.

Financial institutions' marketable assets decrease

Canadian financial institutions, including institutional investors such as trusteed pension plans and mutual funds, were also affected by the drop in equity markets in the third quarter. This resulted in a notable decrease in the value of their marketable securities.

Chart 2
Household debt to net worth, Canada and the United States

The value of Canadian equities and mutual fund units held by financial institutions was down more than 16% in the third quarter. The decline in foreign equity markets had a similar effect on the foreign portfolio holdings of financial institutions, as the value of foreign investments fell by more than 6% in the third quarter of 2008.

Corporate debt-to-equity ratio edges up

Increased borrowing in the Canadian corporate sector translated into a slight increase in the non-financial private corporations' debt-to-equity ratio, which has trended down for much of the last two decades. In the third quarter of 2008, corporations had 53.6 cents of credit market debt for every dollar of equity (at book value), as the growth rate in credit market borrowing exceeded that of equity issuances plus saving.

Financing activity accelerated during the quarter, as non-financial corporations increased investment in plants, equipment and inventories, with notable increases in borrowing in the form of bank loans and bond issues. Corporations continued to record strong profit growth during the quarter, and the non-financial corporate sector remained a net lender to the rest of the economy.

Government net debt-to-gross domestic product ratio declines further

The federal government's credit market debt decreased in the third quarter of 2008. Funds received from the sale of radio spectrum licenses during the quarter helped reduce its demand for funds.

The drop in federal debt was partially offset by increased borrowings by other levels of government. Overall, total government net debt (at book value) as a percentage of gross domestic product edged down to just over 35% in the third quarter, compared with the peak of 92% in mid-1996.

Net foreign debt falls, led by Canadian direct investment abroad

Canada's net foreign indebtedness (with tradable securities on a market value basis) declined to $14.6 billion in the third quarter. Robust foreign direct investment abroad was the major factor in the reduction of Canada's net foreign debt. Direct investment abroad by Canadian firms rose by $30.6 billion to $593.7 billion, on the largest outflows by Canadian companies in four years. Global stock market declines also contributed to lower net foreign debt, as non-residents had larger losses on their Canadian equities than Canadian investors had on foreign stocks.

Reduction in net foreign debt contributes to the growth in national net worth

Even with the large decline in the household sector's net worth, growth in national net worth (total assets less liabilities for all sectors) remained robust, with national net worth rising 3.3% in the third quarter of 2008. The growth in national net worth was attributable to a decline in net liabilities to non-residents and an increase in economy-wide non-financial assets (national wealth). This resulted in a per capita national net worth of $180,000, up from $174,800 in the second quarter of 2008.

National wealth amounted to just over $6 trillion, as growth accelerated to 2.8%, up from the second quarter, with gains in non-residential and residential real estate contributing to the increase.

Chart 3
National net worth increase affected by a decline in net foreign debt

Available on CANSIM: tables 378-0003 to 378-0010.

Definitions, data sources and methods: survey number 1806.

The third quarter 2008 issues of National Balance Sheet Accounts, Quarterly Estimates, Vol. 6, no. 3 (13-214-XWE, free), Canadian Economic Accounts Quarterly Review, Vol. 7, no. 3 (13-010-XWE, free), and National Balance Sheet Accounts: Data Tables, no. 3 (13-022-XWE, free), are now available from the Publications module of our website.

For more information, or to enquire about the concepts, methods or data quality of this release, contact the information officer (613-951-3640,, Income and Expenditure Accounts Division.

Table 1
National balance sheet accounts