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Main page of fourth quarter 2004 PDF version of fourth quarter 2004 Gross domestic product by income and by expenditure Gross domestic product by industry Balance of international payments Financial flows Labour productivity, hourly compensation and unit labour cost International investment position National balance sheet accounts Index of statistical tables More information Previous issues Related products
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Financial flows

Fourth quarter 2004


Overall demand for credit by domestic non-financial sectors eased while household borrowing increased as demand for mortgages remained strong. Total funds raised by domestic non-financial sectors on credit markets amounted to $89.4 billion in the fourth quarter of 2004, seasonally adjusted at annual rates ($22.4 billion at quarterly rates). The demand for funds in both the private and public sectors declined for the second consecutive quarter. Over the same period, households increased their share of total funds raised.

Total funds raised by all domestic non-financial sectors declined
Chart: Total funds raised by all domestic non-financial sectors declined

Financial market developments during the quarter included: a tightening of monetary conditions; an increase in short-term interest rates; a general decline in long-term interest rates; a strengthening of the Canadian dollar and, a stronger stock market performance with stock prices rising for the second consecutive quarter.

Household demand for mortgages rises

Personal saving slipped as investment in residential real estate and borrowing advanced further, while investment in financial assets continued its downward trend. Household borrowing was led by continued demand for mortgage credit, reflecting the ongoing strength in the housing market and encouraged by the decline in the five-year mortgage rate.

With sustained demand for durable goods and a rise in personal expenditure in non-durable goods as well as services, consumer credit borrowing by households remained high. The growth in total household debt that includes mortgages and consumer credit outpaced the growth in personal disposable income resulting in an increased debt-income ratio from 105.1 percent in the third quarter to 105.8 percent in the fourth quarter. However, the effect of this increase on debt servicing was moderated by lower mortgage rates.

Household borrowing on the rise
Chart: Household borrowing on the rise

Corporations build surpluses during the year

Demand for funds by non-financial private corporations softened further from $44.7 billion in the third quarter to $36.0 billion in the fourth quarter ($10.8 billion and $7.4 billion at quarterly rates respectively). Share issues were up in line with share prices, but overall borrowing was down. The overall corporate surplus was down in the quarter, as business investment in plant and equipment strengthened.

Continued string of corporate surpluses
Chart: Continued string of corporate surpluses

Nevertheless, for the year as a whole, the surplus was up strongly as undistributed corporate earnings continued to post strong gains. Annual net lending by the corporate sector grew almost $20 billion for the second consecutive year to more than $80 billion, reflecting corporations’ moderate approach to capital investment while strengthening their balance sheets.

Overall government borrowing declines

Federal government borrowing declined for the second consecutive quarter, in line with gains in surplus posted during the fourth quarter. Bond liabilities of the federal government dropped sharply, reflecting the expanded surplus. However, borrowing requirements for other levels of government continued to rise in the fourth quarter. The provincial government sector had significant issues of long-term debt in the form of provincial bonds which were slightly offset by a decline in short-term debt.

Note to readers

Statistical tables

Information on methods and data quality available in the Integrated Meta Data Base: 1804.

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Date modified: 2005-03-17 Important Notices