National balance sheet and financial flow accounts, first quarter 2022
National net worth rises due to strong energy and house price growth
National net worth, the sum of national wealth and Canada's net foreign asset position, rose 2.6% in the first quarter to $17,590.6 billion, expanding at a relatively slower pace following a string of stronger growth over the previous six quarters and notably slower than the rise of 6.8% in the fourth quarter of 2021. Continued strength in real estate and higher natural resources wealth was hampered in the first quarter of 2022 by a reversal of fortunes in Canada's net foreign asset position, which ended sharply lower after growing for seven consecutive quarters. National net worth per capita reached $455,573 in the first quarter.
The total value of non-financial assets in Canada, also referred to as national wealth, rose 5.1% to $16,440.6 billion. The value of residential real estate increased $344.0 billion to $9,101.9 billion in the first quarter, as the appreciation in home prices continued. Global supply chain disruptions and sanctions resulting from Russia's invasion of Ukraine placed upward pressure on global energy and mineral prices, as the value of natural resources (excluding land) increased 20.9% from the fourth quarter of 2021 to reach $1,781.5 billion.
Canada's net foreign asset position, the difference between Canada's international financial assets and international liabilities, plummeted $352.6 billion to $1,150.0 billion by the end of the first quarter, its lowest level since the third quarter of 2020. The revaluation effect resulting from market price changes (-$248.1 billion), notably equity prices, was the primary contributor to the decline.
The Canadian economy expanded at a slower pace in the first quarter amidst regional restrictions due to the rapid spread of the Omicron variant of COVID-19. Growth in real gross domestic product was mainly driven by increased business investment and household consumption, particularly investment in residential construction and outlays for durable goods respectively.
On a nominal basis, compensation of employees recorded strong gains, mainly due to increases in average wages, which were almost double the rate of growth for employment. Wage growth was broad-based in terms of industry and region, and was the main contributor to the rise in nominal household disposable income and subsequent rise in the savings rate in the first quarter. On a seasonally adjusted basis, mortgage borrowing by households was the third highest on record, as home resale prices increased amidst the start of the Bank of Canada's rate-hiking cycle, which began in March.
The federal government continued to borrow through the issuance of long-term debt, albeit at a slower pace, while the Bank of Canada began to reduce the size of its balance sheet. With the first policy rate hike since 2018, bond prices tumbled during the first quarter on expectations of further interest rate increases. Widespread declines in the valuation of technology companies combined with higher valued natural resource companies led to divergent returns among owners of domestic and foreign securities.
Household savings rate moves higher as wages grow
In the first quarter, seasonally adjusted household consumption rose by 2.4% in nominal terms against the backdrop of a surge in cases of the Omicron variant. Despite households facing rising prices on their purchases, growth in disposable income more than kept pace, growing by 3.3% in the first quarter, resulting in a savings rate of 8.1%. This compares to a 6.9% savings rate in the fourth quarter of 2021 and, outside of the elevated savings during the COVID-19 pandemic years of 2020 and 2021, still denotes the highest savings rate since the fourth quarter of 1995.
Pace of household mutual fund investment remains elevated
Household net savings represent a source of funds that are available to increase non-financial and financial wealth through transactions, that is, the purchase of assets and settlement of liabilities. After accumulating $314.5 billion in currency and deposits over the preceding two years, households recorded a more modest addition of $19.5 billion in the first quarter of 2022. Among chartered banks, households held their funds primarily in personal demand and notice deposits, such as chequing and savings accounts, rather than fixed-term deposits, which are generally more illiquid. With the recent interest rate increase, fixed-term deposits such as guaranteed investment certificates (GICs), may be seen as a more rewarding investment in the near future.
Households continued to purchase mutual funds at a significant pace in the first quarter amid registered retirement savings plan (RRSP) contribution season, adding $20.2 billion in fund shares as gross purchases exceeded redemptions by a relatively wide margin, continuing the trend of strong investment in this asset category since the end of 2020.
Households' net worth reaches new high in the face of challenging market conditions
Household sector net worth—the value of all assets minus all liabilities—increased $194.7 billion to $16,191.7 billion in the first quarter. Financial liabilities grew by $35.0 billion (+1.3%) during the quarter, mainly due to the continued expansion of outstanding mortgage debt, while the value of financial assets decreased for the first time since the first quarter of 2020 when markets were roiled by the initial uncertainty regarding the pandemic. However, the growth in the value of non-financial assets more than compensated for the increased liabilities and declining financial assets, rising by $326.4 billion (+3.5%) to reach nearly $9.6 trillion in the first quarter of 2022.
Residential real estate climbs higher along with interest rates and bond yields
Households' residential real estate rose 3.9% at the beginning of 2022, following a 6.5% increase in the fourth quarter of 2021. The value of residential land (+4.4%) and residential structures (+3.2%) posted sizeable gains. The average resale price increased 10.2% from the fourth quarter of 2021 to reach roughly $800,000 in the first quarter of 2022, while home resale inventory levels increased slightly on a seasonally adjusted basis, but remained at lower than average levels. On a year-over-year basis, there were 12.5% fewer home sales recorded in the first quarter.
By April, the volume of home sales had fallen further as home prices similarly cooled in a number of jurisdictions; the average resale price peaked in February and was followed by two consecutive monthly declines. Real estate as a percentage of household disposable income, an indicator of housing affordability, continued to move higher, reaching 583.7% at the end of the first quarter; this compares with 509.4% from the end of the first quarter of 2021.
Household financial assets pulled lower by weaker bond and foreign equity markets
The value of household financial assets dropped by 1.0% in the first quarter, pulled down by the depreciating values of directly held debt securities and foreign equities. The value of mutual fund shares and life insurance and pension funds, through which households are exposed to significant investments in debt and equity securities, also tumbled.
While the Toronto Stock Exchange Composite Index (TSX) rose 3.1%, following a 5.7% increase in the fourth quarter of 2021, this was driven by specific sectors such as energy. By comparison, the Standard and Poor's 500 (S&P 500), which is more weighted towards technology companies, dropped 4.9% in the first quarter of 2022. This was the first time the TSX—which is more weighted by natural resource companies—outperformed the S&P 500 since the first quarter of 2021. As such, owners of domestic equities tended to outperform owners of foreign equities in the first quarter.
Also impacting financial assets, bond prices recorded a significant drop as yields for debt securities climbed higher, such as those on 5-year Government of Canada bonds, which went from 0.55% on the day the pandemic was declared on March 11, 2020 to 2.39% by the end of March 2022. Higher interest rates translate into higher bond yields, meaning generally lower prices for fixed income securities.
As a result of these market challenges, the value of households' wealth held through institutional investors such as mutual funds and insurance and pension plans decreased by a considerable $206.0 billion in the first quarter, mainly as a result of downward revaluations (-$232.7 billion) and despite overall positive net inflows of $26.8 billion by households into these vehicles. Bonds and foreign equity made up over half (51.4%) of the total financial assets of mutual funds and pension plans.
The contrasting stories behind non-financial asset growth and financial asset decline pushed the ratio of financial assets to non-financial assets down to 97.1% in the first quarter, the first time this ratio has fallen below 100% as real estate gains and financial pains shifted the relative share of these assets in the aggregate household portfolio.
Mortgage borrowing continues to be primary contributor to increase in household debt
On a seasonally adjusted basis, the pace of credit market borrowing accelerated slightly when compared with the prior quarter, with households adding $52.8 billion of debt in the first quarter. Mortgages remained the largest contributor to the heightened borrowing, at $45.4 billion. This was marginally lower than the demand of $46.1 billion in the fourth quarter of 2021. New variable rate mortgages continued to be preferred over fixed rate mortgages in the first quarter despite the rising interest rate environment with the proportion of outstanding variable rate mortgages increasing to 30.7% in the first quarter from 28.1% in the fourth quarter of 2021.
Demand for non-mortgage loans increased to $7.5 billion in the first quarter of 2022 from $3.6 billion in the fourth quarter of 2021 and represented the largest demand for non-mortgage loans since the second quarter of 2018.
The stock of credit market debt (consumer credit, and mortgage and non-mortgage loans) grew 2.0% from the previous quarter to reach $2,702.3 billion in the first quarter, as a result of robust borrowing activity. Mortgage debt reached $1,996.2 billion, while non-mortgage loans stood at $706.2 billion.
Ratio of household credit market debt to disposable income decreases following previous peak
On a seasonally adjusted basis, household credit market debt as a proportion of household disposable income decreased to 182.5% in the first quarter from the record 185.0% in the previous quarter. In other words, there was $1.83 in credit market debt for every dollar of household disposable income in the first quarter. Growing household credit market debt (+2.0%) was outpaced by a surge in household disposable income (+3.3%).
The household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, decreased to 13.48% in the first quarter of 2022 from 13.72% in the fourth quarter of 2021, the first decline since the second quarter of 2021. Household disposable income before interest payments increased by 3.2% in the first quarter of 2022, while total debt payments rose by 1.5%. Total interest payments represented 43.5% of overall debt payments in the first quarter, compared with nearly 50% at the end of 2019, before the pandemic.
During the first quarter of 2022, the Bank of Canada announced its first policy interest rate increase of 25 basis points since the beginning of the pandemic, with another two rate hikes of 50 basis points each occurring in the second quarter. The debt service ratio is impacted by changes to the prime rate for a variety of variable rate debt instruments, while a sizeable proportion of debt is in fixed rate products.
Federal government demand for credit market debt eases, targets longer term borrowing
The federal government demand for credit market debt was $20.4 billion in the first quarter, slightly lower than the $24.7 billion from the fourth quarter of 2021. This borrowing was composed of $24.8 billion in net issuances of federal government bonds, which were partially offset by net redemptions of short-term paper of $5.9 billion, indicating a continued strategy of long-term borrowing.
The Bank of Canada recorded net sales and redemptions of federal bonds of $1.9 billion, the first such event since the first quarter of 2020, as the central bank ended its quantitative easing program and moved into the reinvestment phase, decreasing its purchases of bonds.
The demand for funds by other levels of government (excluding social security funds) resulted in an overall reduction in their outstanding debt via net transactions (-$1.8 billion). This was largely attributable to $14.4 billion in net redemptions of paper, which exceeded their net issuances of bonds (+$10.7 billion).
Debt to gross domestic product declines as economic growth outpaces borrowing
The ratio of federal government net debt (the book value of total financial liabilities less total financial assets) to gross domestic product (GDP) declined to 36.5% in the first quarter of 2022 from 37.1% in the fourth quarter of 2021, while the ratio of other government net debt to GDP fell to 22.8% from 23.6% over the same period. Stronger growth in GDP relative to debt was a primary factor in the ratio's decline.
Private non-financial corporations' non-mortgage loan borrowing decreases
Following significant merger and acquisition activity in the fourth quarter of 2021, the demand for funds by private non-financial corporations decreased from $66.9 billion in that quarter to $27.4 billion in the first quarter of 2022. Borrowing was mainly in the form of non-mortgage loans (+$16.3 billion), bonds and debentures (+$16.2 billion), and mortgage loans (+$8.5 billion). This was partially offset by a decrease in listed shares (-$12.3 billion).
On the other side of the ledger, private non-financial corporations decreased their holdings of Canadian currency and deposit assets by $12.9 billion in the first quarter, the first decline since the first quarter of 2019. Canadian currency and deposit assets decreased to $619.0 billion by the end of the first quarter of 2022, representing 13.5% of private non-financial corporations' total financial assets, up from 11.5% recorded at the end of the fourth quarter of 2019.
Private non-financial corporations' mineral and energy reserves, which are significant components of their natural resource wealth and net worth, increased by 23.5% from the fourth quarter of 2021 to reach $1,283.6 billion in the first quarter of 2022. This was primarily the result of rising energy prices, which pushed up the value of Canada's resource wealth. According to Statistics Canada's Raw Materials Price Index, from December 2021 to March 2022, the price of crude oil and bitumen jumped 60.0%, while the price of coal rose 14.9%. Crude oil prices continued to climb into early June 2022.
The ratio of private non-financial corporations' credit market debt (book value) to GDP stood at 72.0% in the first quarter. This ratio has continued to decline, moderated by growing GDP, from its record high at the beginning of 2021, when it reached 75.5%. However, according to the Canadian Survey on Business Conditions released in May 2022, nearly one-third of businesses reported they cannot incur additional debt, up from just over one-quarter in February 2022.
Financial sector supply of funds decreases
Financial corporations delivered $65.9 billion in funds to the economy through financial market instruments in the first quarter of 2022, a decrease of $46.0 billion from the previous quarter. The supply of funds was primarily in the form of non-mortgage ($55.0 billion) and mortgage ($44.7 billion) loans, and was partially offset by a net retirement in short-term paper (-$30.4 billion).
The market value of financial corporations' financial assets decreased 0.8% to $20,212.4 billion by the end of the first quarter. The decline was due to a $263.5 billion drop in the value of foreign equity, coupled with a $138.9 billion decrease in the value of debt securities. However, these were partially offset by growth in the value of loan assets and domestic equity.
The financial assets of mutual funds, whose wealth is principally held by households, declined for the first time since the beginning of the pandemic, falling $97.6 billion to $3,262.9 billion in the first quarter of 2022, while net investment in mutual fund shares decreased from a record high in the fourth quarter of 2021. The decline in assets was mainly due to losses in the value of foreign equity (-$88.6 billion) and Canadian bonds and debentures (-$16.6 billion).
In the first quarter, the mining, quarrying, and oil and gas extraction and petroleum and coal product manufacturing sectors represented approximately 10% of the domestic listed share holdings of mutual funds, while Canadian chartered banks represented around 20% of their holdings. Mutual fund holdings of listed shares increased by 0.9% in the first quarter to reach $523.4 billion.
Note to readers
This release of the national balance sheet and financial flow accounts for the first quarter of 2022 includes revised estimates from the first quarter to the fourth quarter of 2021. These data incorporate new and revised data, as well as updated data on seasonal trends. An overview of the conceptual, methodological and statistical revisions incorporated as of the release for the third quarter of 2021 is available in "An overview of revisions to the Financial and Wealth Accounts, 1990 to 2021."
Data enhancements to the national balance sheet and financial flow accounts, such as the development of detailed counterparty information by sector, will be incorporated on an ongoing basis. To facilitate this initiative and others, it is necessary to extend the annual revision period (normally the previous three years) at the time of the third quarter release. Consequently, for the next two years, with the third quarter release of the financial and wealth accounts, data will be revised back to 1990 to ensure a continuous time series.
Financial and wealth accounts on a from-whom-to-whom basis: Selected financial instruments
The data visualization product "Financial accounts on a from-whom-to-whom basis, selected financial instruments" has been updated with data from the first quarter of 2021 to the first quarter of 2022.
Data on the national balance sheet and financial flow accounts for the second quarter of 2022 will be released on September 12, 2022.
Overview of the financial and wealth accounts
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. The NBSA cover all national non-financial assets and all 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 (table 38-10-0238-01). 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 issuances 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) to 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 institution can also change for other reasons. These other types of changes, referred to as other economic flows, are recorded in the other changes in assets account.
There are two main components to this account. 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 Canadian System of Macroeconomic Accounts glossary.
Distributions of household economic accounts
The NBSA for the household sector is allocated across a number of socioeconomic dimensions as part of the distributions of household economic accounts (DHEA). Data on wealth and its components by income quintile, age group, generation and region are available in tables 36-10-0585-01, 36-10-0586-01, 36-10-0589-01 and 36-10-0590-01.
The methodology for DHEA wealth estimates can be found in the article "Distributions of Household Economic Accounts, estimates of asset, liability and net worth distributions, 2010 to 2019: Technical methodology and quality report."
The data visualization product "Financial accounts on a from-whom-to-whom basis, selected financial instruments," which is part of Statistics Canada – Data Visualization Products (71-607-X), is now available.
As a complement to this release, you can also consult the document "An overview of revisions to the Financial and Wealth Accounts, 1990 to 2021," which is part of Latest Developments in the Canadian Economic Accounts (13-605-X).
As a complement to this release, you can also consult the data visualization product "Distributions of Household Economic Accounts, Wealth: Interactive tool," which is part of Statistics Canada – Data Visualization Products (71-607-X).
As a complement to this release, you can also consult the data visualization product "Securities statistics," which is part of Statistics Canada – Data Visualization Products (71-607-X).
The Economic accounts statistics portal, accessible from the Subjects module of our website, features an up-to-date portrait of national and provincial economies and their structure.
The Latest Developments in the Canadian Economic Accounts (13-605-X) is available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is available.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
The Special Data Dissemination Standard Plus product "Other Financial Corporations Survey," also known as "Assets and liabilities of other financial corporations by sector, market value, quarterly" (table 36-10-0668-01), is available.
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