National balance sheet accounts

Fourth quarter 2005

Note to readers

National net worth accelerates

National net worth reached $4.5 trillion by the end of the fourth quarter, or $137,300 per capita. National net worth grew 1.4% in the fourth quarter, up sharply from 0.7% in the third. Third quarter growth was significantly constrained by a marked increase in net foreign debt (what is owed non-residents less what they owe to Canada).

Growth in national net worth picks up

The nation’s net worth increased by $60.4 billion in the fourth quarter, as national saving advanced led by corporate undistributed earnings. This increase was comprised of a $53.5 billion increase in national wealth (economy-wide non-financial assets) and a slight decrease in net foreign debt.

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Continued strong economic performance in the fourth quarter was reflected in the sustained growth of national wealth (+1.2%). Despite slowing investment in new housing, residential real estate continued to be the major contributor to growth in national wealth, accounting for about half of the gain. Increases in machinery and equipment and non-residential structures were significant contributors in this quarter as well.

Canadians' net foreign indebtedness (with marketable securities on a market value basis) decreased slightly in the quarter, following a significant exchange-rate driven increase in the third quarter. Despite the further strengthening of the Canadian currency, unrealized capital gains in the value of Canadian portfolio investments abroad helped reduce Canada’s net foreign debt. Growth in the value of portfolio investment in foreign assets by Canadians outpaced that of non-resident portfolio investments in Canadian equity and debt securities.

However, with marketable securities on a book value basis, Canadians’ net foreign indebtedness increased slightly in the fourth quarter.

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Corporate finances improve further

Supported by solid profits in the fourth quarter and despite increases in business investment in structures and machinery and equipment, the corporate sector posted a record surplus. Since 2000, corporations have generated more funds from internal operations than required to finance their non-financial capital acquisition. As a result, the corporate sector has been a growing net lender to the rest of the economy, while significantly re-structuring their balance sheets.

The reduced reliance on borrowed funds was reflected in the ratio of debt-to-equity (at book value) for non-financial private corporations, which fell further in the fourth quarter.

Corporate leverage continues to ease

For more in-depth analysis of the corporate surplus and its effects, see the publication Recent Trends in Corporate Finance: Some Evidence from the Canadian System of National Accounts.

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Household net worth advances at a slower pace

Household net worth grew at a slower pace (+1.4%) than in the third quarter (+2.4%). This reflected slower increases in both residential real estate and equities.

Personal sector share holdings and pension assets increased marginally, reflecting both lower stock market gains and reduced acquisition of financial assets during the quarter.

The value of residential real estate increased less in the fourth quarter compared to the third, reflecting both the trend of slowing investment in new housing construction and weaker resale markets in the quarter.

Households’ appetite for debt eased with demand for consumer credit and mortgage funds being less exuberant than in the previous quarter. The ratio of household debt to net worth remained flat at 18.1% in the quarter.

Growth in total household debt slightly outpaced that of personal disposable income, as Canadian households currently carry about $1.08 in debt for every dollar of their disposable income.

Household leverage remains flat

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Government debt-to-GDP continues to fall

With the government sector as a whole registering yet another surplus in the fourth quarter, government net debt (total liabilities less total financial assets) dropped for a third consecutive quarter. Net government debt as a percentage of GDP declined further, reaching its 1985 level. Net debt represents roughly half of GDP, compared to 90% a decade ago.

Annual review, 2005

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National balance sheet improves at slower pace

Net worth on the national balance sheet expanded 5.3% in 2005. However, marginally slower growth in national wealth and an overall increase in net foreign debt in the year resulted in lower national net worth growth than the 6.2% pace set in 2004.

National wealth grew 5.5% in the year, compared to 5.6% in 2004. Gains in investment and valuation of residential real estate assets continued to be the main contributor to the increase in the value of non-financial assets.

Accumulated plant and equipment assets, held largely by the corporate sector, increased its contribution share in 2005, accounting for 30% of the change in national wealth, as compared to 24% in 2004.

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Natural resources pull up the growth rate of national wealth

The broader measure of national wealth – including natural resources – grew 6.1% in 2005, at the same pace as in 2004. Growth was mainly sustained by higher resource commodity prices.

The value of selected natural resource assets (timber, energy and mineral resources) rose 7.6% to $925.4 billion in 2005. The rate of growth was lower from that in 2004, partly due to the offsetting effects of the appreciating Canadian dollar.

The value of minerals grew 14.9% in 2005, propelled by strong international demand. The value of energy reserves, which account for more than half of resource wealth, was up 8.4%. Among energy resources, crude oil grew 35.3% through high oil prices. Timber stocks grew 4.0% in value.

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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.