Financial flows

Third quarter 2006

Note to readers

Highlights

Total funds raised by domestic non-financial sectors on credit markets amounted to $109.1 billion in the third quarter of 2006 (seasonally adjusted at annual rates), up from the second quarter. This reflected slower repayment of public sector debt relative to the second quarter, and steady demand for funds by the private sector.

Total funds raised by all domestic non-financial sectors rebounds

Falling mortgage rates and bond yields highlighted financial markets in the third quarter of 2006, despite an unchanged bank rate since May 2006. After gains in July and August, prices in the Toronto stock exchange closed the quarter slightly above June 2006 index levels. The Canadian dollar maintained its strength against the U.S. dollar, hovering just under the 90 cent mark.

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Household sector

Overall household borrowing advanced in the third quarter. Mortgage demand softened, reflecting the weakness in residential investment. Strong spending on consumer durables - particularly on motor vehicles - and on services was reflected in a pick up in the use of consumer credit.

Total household debt, the sum of mortgages and consumer credit, edged up, amounting to 109.5% of personal disposable income. However, debt servicing charges remained stable at about 8% of personal disposable income.

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Corporate sector

The corporate sector’s position as net lender to the rest of the economy remained, as the surplus expanded in the third quarter. Corporations continued to internally generate more than enough funds to finance strengthened investment. With profits up 2.7% in the quarter, net saving advanced for the second straight quarter, on the heels of a slight drop in the first quarter.

Reduced demand for borrowed funds by non-financial private corporations in the quarter was reflected in loans and short-term paper. Net new share issues continued to be less than the strong issuance of the first quarter of 2006, despite gains in stock prices during the summer.

Corporate surplus expands

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Government sector

Reduced federal tax revenue and a transfer of $3.3 billion to the provinces under Bill C-48 resulted in the federal government becoming a net borrower (at seasonally adjusted annual rates) for the first time in six quarters. The overall government surplus declined in the third quarter.

Total government borrowing

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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.