National balance sheet accounts

Third quarter 2005

Note to readers

Growth in national net worth slows

National net worth reached $4.4 trillion by the end of the third quarter, or $135,500 per capita. The gain in net worth resulted from an increase in national wealth (economy-wide non-financial assets), which was largely offset by an increase in net foreign debt. As a result, growth in national net worth slowed to 0.7% in the third quarter, less than half the pace set in the second quarter and down from its average (+1.5%) over the past ten quarters.

Growth in national net worth slows

The strong performance of the economy in the third quarter was reflected in the continuing advance in national wealth (+1.3%). While residential real estate continued to be a main contributor to growth in national wealth, increases in machinery and equipment and non-residential structures were significant contributors in this quarter as well.

Canadians' net indebtedness to non-residents (the amounts owing to non-residents less foreign assets held by Canadians) increased in the third quarter, following three quarters of decline. Canadian liabilities to non-residents rose, driven by strong inward investment flows as well as appreciation of marketable shares held by foreigners. However, these gains were partly offset by declines in foreign holdings of Canadian debt securities. Canadian assets abroad grew very modestly, as foreign equity holdings were affected by the significant appreciation of the Canadian dollar against the U.S. dollar during the quarter and also reflected relatively weaker stock markets in the U.S.

Top of Page

Household net worth gains continue to be driven by equities and residential real estate

The personal saving rate was below zero in the quarter as it was during the previous two quarters. Even though saving was negative, household net worth accelerated (+2.3%) for the third consecutive quarter.

Gains in the market value of equities were the largest contributor to the change in household net worth. Stock market advances in Canada boosted the value of personal sector share holdings, investment fund units and pension assets. These gains were moderated somewhat by the impact of appreciation of the Canadian dollar on the holdings of U.S. dollar-denominated securities held by pension funds and other institutional investors. Gains in the value of residential real estate, driven by housing prices, continued to make a significant contribution to the change in household net worth. Increases in household assets, however, were partially offset by higher liabilities.

Households’ appetite for consumer and mortgage debt continued, supported by sustained low interest rates. The growth in total household debt continued to outpace that of personal disposable income. This resulted in a debt-to-income ratio of 108.0 percent in the third quarter, up from 107.8 percent in the second quarter. Canadian households carry about $1.08 in debt for every dollar of their disposable income. However, given the strong growth in household net worth, the ratio of household debt to net worth remained flat at 18.1% in the quarter.

Household leverage remains flat

Top of Page

Corporate debt-to-equity edges down

Corporations continued to generate more funds from internal operations than they required for financing their non-financial capital acquisition. As a result of this profit-driven string of surpluses, the corporate sector has been a net lender to the rest of the economy and has also used these funds to restructure their balance sheets, largely through paying down debt.

For non-financial private corporations, the ratio of debt-to-equity (at book value) edged down in the quarter extending its long-term trend. This was driven largely by further strength in undistributed profits coupled with a downward revaluation of U.S. dollar-denominated bond liabilities.

Corporate leverage continues to ease

Top of Page

Government debt-to-GDP at 20-year low

Government net debt (total liabilities less total financial assets) edged down as the government sector registered another surplus in the third quarter. Net government debt as a percentage of GDP declined further, reaching 20-year lows where net debt stands at roughly half of GDP.

Top of Page

Statistical tables

• National balance sheet, market value
• Credit market summary table

Information on methods and data quality available in the Integrated Meta Data Base: 1806.