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National balance sheet and financial flow accounts, first quarter 2018

Released: 2018-06-14

National net worth increases for the third consecutive quarter

National net worth, the sum of national wealth and Canada's net foreign asset position, increased 1.6% to $11,375.9 billion at the end of the first quarter, primarily due to the strength of Canada's international investment position. On a per capita basis, national net worth increased from $302,986 in the fourth quarter to $307,036.

Canada's net foreign asset position rose by $110.1 billion to a record $544.2 billion in the first quarter, a second consecutive quarterly increase. This growth reflected the upward revaluation effect (+$104.2 billion) of a depreciating Canadian dollar against major foreign currencies. At the end of the first quarter, 97% of Canada's international assets were denominated in foreign currencies, compared with 40% of Canada's international liabilities.

National wealth, the value of non-financial assets in the Canadian economy, rose 0.6% to $10,831.7 billion at the end of the first quarter, a deceleration from the 1.3% growth in the fourth quarter of 2017.

Chart 1  Chart 1: Changes in national net worth
Changes in national net worth

Household sector net worth edges down

Net worth of the household sector edged down 0.2% in the first quarter to $10,892.0 billion, the first decrease since the third quarter of 2015. Sluggish growth in the value of non-financial assets (+0.2%) and a $27.2 billion decrease in the value of financial assets contributed to the decline.

Among financial assets, equity and investment funds posted the largest decline (-$26.5 billion), while household residential real estate continued the weaker growth (+0.3%) that began in 2017.

On the other side of the ledger, financial liabilities edged up 0.3% in the quarter as household borrowing slowed. Consequently, the ratio of debt to total assets edged up to 16.6%.

Chart 2  Chart 2: Household sector leverage: Debt to assets
Household sector leverage: Debt to assets

Household borrowing moderates

On a seasonally adjusted basis, households borrowed $22.2 billion in the first quarter, down from $25.4 billion in the previous quarter. Mortgage borrowing decreased $2.0 billion to $13.7 billion, the lowest level since the second quarter of 2014. This mirrored the 17.0% decrease in the value of residential resale activity in the first quarter, coinciding with the introduction of new mortgage regulations and higher interest rates.

Total household credit market debt (consumer credit, and mortgage and non-mortgage loans) totalled $2,134.3 billion in the first quarter. Credit market debt as a proportion of household disposable income (adjusted to exclude pension entitlements) decreased from 169.7% in the fourth quarter to 168.0%, as disposable income increased at a faster rate (+1.3%) than credit market debt (+0.3%). In other words, there was $1.68 in credit market debt for every dollar of household disposable income. Mortgage debt reached $1,402.1 billion, while consumer credit stood at $627.5 billion.

The seasonally adjusted household debt service ratio, measured as total obligated payments of principal and interest as a proportion of household disposable income for mortgage and non-mortgage debt, remained relatively flat at 13.9% in the first quarter. Meanwhile, mortgage interest payments (+3.7%) continued to outpace mortgage principal payments (-0.2%).

Chart 3  Chart 3: Household mortgage interest and obligated principal payments
Household mortgage interest and obligated principal payments

Federal government demand for funds continues to decline

The federal government reduced overall liabilities in the quarter. This decline was spurred by $9.7 billion of net retirements of short-term paper, which more than offset $2.7 billion in net bond issuances. The ratio of federal government net debt (book value) to gross domestic product (GDP) edged up to 28.9%.

The demand for funds by other levels of governments was $8.5 billion, driven by net issuances of bonds and debentures (+$9.0 billion). The ratio of other government net debt (book value) to gross domestic product GDP totalled 27.8%.

Demand for funds by non-financial private corporations levels off

The demand for funds by non-financial private corporations was $17.1 billion in the first quarter. This was a return to lower levels after strong mergers and acquisitions activity and other borrowing in the first half of 2017.

The value of financial liabilities and equity of non-financial private corporations declined $127.6 billion over the quarter. This change was mainly from the other changes in assets account, which measures changes in the value of assets and liabilities due to asset price changes. Similarly, changes in asset prices caused non-financial private corporations' financial assets to decrease by $42.4 billion, while non-financial assets increased by $28.2 billion. The result was an overall improvement in the net worth of the non-financial private corporations sector.

Chart 4  Chart 4: Borrowing by private non-financial corporations
Borrowing by private non-financial corporations

Financial sector bond issuance leads increase in supply of funds

The financial sector provided $38.2 billion of funds to the economy through financial market instruments in the first quarter, up from $23.6 billion in the fourth quarter. This was mostly attributable to bonds (+$41.6 billion).

The value of financial assets of financial corporations decreased by $72.3 billion to $13,790.3 billion at the end of the first quarter. Downward revaluations of $92.4 billion contributed to the lower value of financial assets, led by equity and debt securities.

Chart 5  Chart 5: Economic transactions and other changes to financial corporations' assets
Economic transactions and other changes to financial corporations' assets





  Note to readers

Revisions

This first quarter release of the national balance sheet and financial flow accounts includes revised estimates from the first quarter of 2017 through the fourth quarter of 2017. These data incorporate new and revised source data, as well as updated seasonal trends.

Later this year, at the time of the third quarter release, data enhancements to the national balance sheet and financial flow accounts will be incorporated such as the development of detailed counterparty information by sector. At this time, estimates will be revised back to 1990 to ensure a continuous time series.

Debt service ratio

Starting with the second quarter 2018 release, the debt service ratio will be published in the quarterly release of the Financial and Wealth Accounts in table 38-10-0235-01 (formerly CANSIM 378-0123): Financial indicators of households and non-profit institutions serving households. A mapping between the current and new series will be provided at that time.

Next release

Data on the national balance sheet and financial flow accounts for the second quarter will be released on September 14.

Products

The Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X) is available.

For reference, the document "Understanding Household credit measures, a joint study by the Bank of Canada and Statistics Canada," which is part of Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X) is also available. Additionally, reconciliation estimates are now available in table 36-10-0441.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available. This publication will be updated to maintain its relevance.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).

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