Financial flows

First quarter 2007

Financial flows note to readers

Highlights

Total funds raised by domestic non-financial sectors on financial markets amounted to $158.9 billion in the first quarter of 2007 (seasonally adjusted at annual rates), up from the fourth quarter of 2006. Households led private sector borrowers as the largest contributors of demand for funds. The government sector returned to financial markets, led by provincial governments, after negligible borrowing in the fourth quarter of 2006.

Chart E.1 Overall demand for funds rises

Key financial market indicators were steady during the first quarter of 2007. With the bank rate unchanged since May 2006, mortgage rates remained relatively stable, closing at December 2006 levels. Bond yields have also stayed relatively steady since September 2006. Shares prices continued to rise, although at a much reduced pace as compared to the fourth quarter of 2006. The Canadian dollar depreciated to the 85 cent mark against the U.S. greenback during the first quarter of 2007.

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Household sector

Households continued to borrow in the form of mortgages and consumer credit in the first quarter. A rise in housing investment, particularly in re-sale and renovation activity, was a factor behind firm mortgage borrowing. Steady consumer spending, buoyed by a pick-up in purchases of semi-durable goods, contributed to sustained consumer credit use.

Household debt in the form 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.

Investment in financial assets by households during the first quarter was led by the acquisition of pension assets, equities, and investment fund units.

Chart E.2 Household borrowing continues to grow

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Corporate sector

For private non-financial corporations, the slowdown in business investment in plant and equipment was a factor behind the levelling of demand for funds. New share issuances and loans led demand for funds in the first quarter.

Government sector

The overall government sector maintained its surplus position in the first quarter, despite deficits in both the provincial and municipal government sectors. The federal government sector met its financing needs largely through short-term debt, while the provincial government sector relied more on the issuance of bonds.

Chart E.3 Government borrowing up

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Statistical tables

• Table E.1 Financial market summary table
• Table E.2 Sector accounts - Persons and unincorporated businesses
• Table E.3 Sector accounts - Corporations and government business enterprises: Total
• Table E.4 Sector accounts - Government
• Table E.5 Sector accounts - Non-residents

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