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Growth in national net worth accelerated
Growth in national net worth strengthened to 2.3% in the first quarter from the fourth quarter (+1.3%). The increase in net worth resulted from stronger growth in national wealth as well as a further reduction in net foreign debt.
National net worth advances at a faster pace
National wealth growth accelerated to 2.1%, exceeding growth in the fourth quarter (+1.0%). While investment in new residential construction slowed, the gain in value of residential real estate was supported by firmer housing prices. Overall, the increase in the value of residential real estate accounted for about 40% of the increase in national wealth in the quarter.
Canadians' net indebtedness to non-residents declined in the first quarter, the second straight decline. Canadian assets abroad grew, helped by the depreciation of the Canadian dollar against the U.S. dollar during the quarter, while Canadian liabilities to non-residents grew more modestly.
Household net worth driven by real estate and equities
The first quarter of 2005 was marked by the first negative savings by households in decades with the personal savings rate dropping to -0.6%. Despite this development, household net worth continued to advance (+1.5%) but at a slower pace than the fourth quarter.
Gains in the market value of residential real estate and of equities were the greatest contributors to the change in household net worth. Stock market advances boosted the value of personal sector share holdings. Increases in household assets, however, were partially offset by expanded liabilities.
The demand for consumer and mortgage credit was up from the previous quarter. With sustained low interest rates, the growth in total household debt continued to outpace the growth in personal disposable income. This resulted in a debt to income ratio of 107.3 percent in the first quarter, up from 105.8 percent in the fourth However, the ratio of household debt-to-net worth slid to 17.9% in the quarter, as growth in net worth exceeded growth in debt.
Household debt declines relative to net worth
Corporate debt-to-equity edged down
Since 2000, corporations have generated more funds from internal operations in most quarters than they required to finance their non-financial capital acquisitions. 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) continued its downward trend, reaching a new low in the first quarter as it has done in each quarter over the last four years.
Corporate leverage continues to ease
Government debt-to-GDP at twenty year low
Government net debt—that is, total liabilities less total financial assets—edged down, as the government sector maintained its surplus position in the first quarter. Net government debt as a percentage of GDP declined further, continuing a four year string of quarterly declines and has reached levels last seen twenty years ago.