Financial flows

Second quarter 2005

Highlights

Overall demand for credit eased in the second quarter of 2005, with total funds raised by domestic non-financial sectors on credit markets amounting to $133.7 billion (seasonally-adjusted at annual rates) down from $136.3 billion in the previous quarter. This decline was in line with a significant drop in demand for funds by the public sector, which reflected a reduction in federal government liabilities.

Total borrowings edged down

The second quarter in the financial markets was marked by an easing of monetary conditions, as well as lower mortgage rates. Although slightly abating since the end of the first quarter, the Canadian dollar still closed above the 80 cents mark. A stronger stock market performance resulting from higher metal and energy prices was also among the highlights of the quarter.

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Household demand for credit still on the rise

Growth in household mortgage demand was driven by a pick-up in residential construction and increased activity in the resale market, while encouraged by low interest rates. Consumer credit demand by households remained firm in line with personal expenditure in durable goods.

Household borrowing continues to grow

The growth in mortgage and consumer credit debt continued to outpace the growth in personal disposable income rising to 107.8 percent, up from 107.1 percent in the first quarter. This rise was partly moderated by lower debt servicing charges resulting from lower mortgage rates. With households dis-saving (negative personal saving) for the second consecutive quarter and housing investment up, the personal sector deficit expanded further in the quarter.

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Corporations continue to build surpluses

The corporate surplus rose again in the second quarter. Corporations continued to supply significant amounts of funds to the rest of the economy, extending a five year-trend. However, the demand for funds by non-financial private corporations was up in the quarter, reflecting both borrowing and equity issues.

Continued string of corporate surpluses

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Government demand for funds declines

Borrowing requirements for the government sector as a whole fell sharply. During the first quarter, the federal government borrowed on a short term basis to make higher payments under the Canadian Health and Social Transfer. This debt was paid down in the second quarter from surplus funds. However, borrowing of other levels of government was up in the quarter.

Total government borrowing declined

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Statistical tables

• Financial market summary table
• Sector accounts - Persons and unincorporated businesses
• Sector accounts - Corporations and government business enterprises: Total
• Sector accounts - Government
• Sector accounts - Non-residents

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