National balance sheet and financial flow accounts, second quarter 2016
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National wealth increases while Canada's international investment position declines
National wealth, the total value of non-financial assets in the Canadian economy, rose $110.3 billion to $9,443 billion at the end of the second quarter. The main contributor to growth was an increase of $130.8 billion in the value of real estate, which was partly offset by an $11.3 billion decline in the value of natural resource wealth.
National net worth, the sum of national wealth and Canada's net foreign asset position, was nearly unchanged, edging up $3.5 billion to $9,592 billion at the end of the second quarter. Gains in the value of non-financial assets were mostly offset by a decline in Canada's net foreign asset position. On a per capita basis, national net worth was $264,600 in the second quarter, compared with $265,200 in the first quarter.
Canada's net foreign asset position decreased by $106.8 billion in the second quarter to $149.0 billion. This was the second consecutive quarter of significant decline. Growth in Canada's international liabilities exceeded that of international assets, resulting in a decline in Canada's net foreign asset position.
Real estate and equity drive increases in household net worth
Household sector net worth at market value was up 1.9% in the second quarter to $9,837 billion. On a per capita basis, household net worth was $271,300. The main contributor to the rise in net worth was a 2.2% gain in the value of non-financial assets, primarily real estate, which increased because of higher prices. Financial assets grew 1.7%, as stronger domestic and foreign securities markets pushed up the value of household equity and investment fund shares and life insurance and pension assets.
Overall, the value of total household assets rose $223.9 billion in the second quarter, while the value of liabilities increased $38.8 billion. The ratio of household debt to assets was 16.9%, relatively unchanged from the previous quarter.
Total household credit market debt (consumer credit, and mortgage and non-mortgage loans) reached $1,973 billion at the end of the second quarter. Consumer credit was $585.8 billion, while mortgage debt stood at $1,293 billion. The share of mortgage liabilities to total credit market debt was unchanged at 65.6%, ending an unbroken upward trend that began in the first quarter of 2010.
An increase in household credit market debt (+2.0%) outpaced weaker-than-normal growth in disposable income (+0.5%) in the second quarter. Consequently, the ratio of household credit market debt to disposable income (excluding pension entitlements) rose from 165.2% in the first quarter to 167.6% in the second quarter. In other words, households held $1.68 in credit market debt for every dollar of disposable income.
On a seasonally adjusted basis, households borrowed $29.2 billion in the second quarter, up $3.5 billion from the previous quarter. Mortgage borrowing represented $19.1 billion of total borrowing, up from $18.4 billion in the previous quarter, while borrowing in the form of consumer credit and non-mortgage loans was $10.1 billion, up from $7.3 billion.
The household debt service ratio (seasonally adjusted), measured as total obligated payments of principal and interest as a proportion of disposable income adjusted to include actual interest paid, increased from 14.1% in the first quarter to 14.2% in the second quarter. The interest-only debt service ratio, defined as household mortgage and non-mortgage interest paid as a proportion of disposable income, was 6.3%.
As interest rates have remained at historical lows, the amount of mortgage principal paid by households has increased, steadily approaching the total amount of mortgage interest paid.
Governments remain net borrowers
In the second quarter, the ratio of federal government net debt (book value) to gross domestic product was unchanged from the previous quarter at 31.0%. Meanwhile, the ratio for other levels of government increased to 29.5%, continuing an upward trend that began in late 2008.
The federal government recorded $15.2 billion in net issuances of Canadian short-term paper in financial markets in the second quarter, which were slightly offset by $1.1 billion in net retirements of bonds and debentures.
Other levels of government borrowed $11.4 billion on financial markets during the second quarter. The bulk of the borrowing was composed of $7.7 billion in net issuances of Canadian bonds and debentures, and $2.9 billion in net issuances of Canadian short-term paper.
Demand for funds by non-financial private corporations increases
Non-financial private corporations increased their demand for funds to $44.5 billion in the second quarter through new issues of equity and higher borrowing in financial markets to finance operations and merger and acquisition activities.
On a book value basis, the credit market debt-to-equity ratio of non-financial private corporations was up slightly from the previous quarter. At the end of the second quarter, there was 70 cents of credit market debt for every dollar of equity, the highest ratio since the second quarter of 2009.
Foreign equities increase the value of financial corporations' assets
The financial sector provided $99.6 billion of funds to the economy through credit market instruments, up sharply from $58.7 billion in the previous quarter. In the second quarter, funds were provided in a variety of forms, including mortgages ($28.4 billion), non-mortgage loans ($20.6 billion), bonds and debentures ($17.0 billion), and Canadian short-term paper ($14.1 billion).
The value of the financial assets of financial corporations was up $279.7 billion at the end of the second quarter to $12,428 billion. This rise was mainly the result of increases in the value of equity and investment fund shares, which was up as a result of stronger domestic and foreign securities markets, and higher lending to households and corporations.
Households and non-profit institutions serving household sector indicators – Market value, not seasonally adjusted
Note to readers
The NBSA are composed of the balance sheets of all sectors and subsectors of the economy. The main sectors are households, non-profit institutions serving households, financial corporations, non-financial corporations, government and non-residents. They cover all national non-financial assets and financial asset-liability claims outstanding in all sectors. To improve the interpretability of financial flows data, selected household borrowing series are available on a seasonally adjusted basis (CANSIM table 378-0127). All other data are unadjusted for seasonal variation. For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.
The FFA articulate net lending or borrowing activity by sector by measuring financial transactions in the economy. The FFA arrive at a measure of net financial investment, which is the difference between transactions in financial assets and liabilities (for example, net purchases of securities less net issuance of securities). The FFA also provide the link between financial and non-financial activity in the economy, which ties estimates of saving and non-financial capital acquisition (for example, investment in new housing) with the underlying financial transactions.
While the FFA record changes in financial assets and liabilities between opening and closing balance sheets that are associated with transactions during the accounting period, the value of assets and liabilities held by an institutional unit can also change for other reasons. These other types of changes, referred to as other economic flows, are recorded in the OCAA.
There are two main components to the OCAA. One is the other changes in the volume of assets account. This account includes changes in non-financial and financial assets and liabilities relating to the economic appearance and disappearance of assets, the effects of external events such as wars or catastrophes on the value of assets, and changes in the classification and structure of assets. The other main component is the revaluation account, showing holding gains or losses accruing to the owners of non-financial and financial assets and liabilities during the accounting period as a result of changes in market price valuations.
At present, only the aggregate "other change in assets" is available within the Canadian System of Macroeconomic Accounts; no details are available on the different components.
Definitions concerning financial indicators can be found in "Financial indicators from the National Balance Sheet Accounts" and in the System of Macroeconomic Accounts glossary.
Data on financial and wealth accounts for the second quarter were released along with revised data for the first quarter. These data incorporate new and revised data, as well as updated data on seasonal trends.
Additional information on the treatment of natural resource wealth in the NBSA is available in the article "Natural resource wealth statistics in the National Balance Sheet Accounts."
Data on the national balance sheet and financial flow accounts for the third quarter will be released on December 14.
The System of Macroeconomic Accounts module, accessible from the Browse by key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available from the Browse by key resource module of our website, under Publications.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available from the Browse by key resource module of our website, under Publications. This publication will be updated to maintain its relevance.
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