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National balance sheet accounts
First quarter 2006
Growth in national net worth slows
National net worth reached $4.6 trillion by the end of the first quarter, or $141,000 per person. The gain in net worth resulted from an increase in national wealth (economy-wide non-financial assets) in addition to a decrease in net foreign debt. Growth in national net worth slowed to 1.4% in the first quarter, less than the average of 1.7% for the previous ten quarters. National saving edged down with a reduction in the national saving rate. Saving grew in the personal sector while slowing for government and corporations.
Growth in national net worth slows
Growth in national wealth decelerated (+0.9%) in the first quarter. While reduced, the increase in residential real estate continued to be the major contributor to this growth. It accounted for more than half of the increase in national wealth in the quarter. Increases in other non-financial assets including machinery and equipment contributed further to the gain in overall wealth.
Canadians' net indebtedness to non-residents (the amounts owing to non-residents less the foreign assets held by Canadians) decreased in the first quarter. Growth in Canadian assets abroad, particularly portfolio investments, exceeded the growth in Canadian liabilities to non-residents. Canadian liabilities to non-residents increased, largely due to the increased value of their holdings of Canadian equities.
Household net worth gains continue to be driven by equities and real estate
Gains in the market value of equities were the largest contributor to the change in household net worth. With stock market indexes at record levels, advances in the price of equities helped boost the value of personal sector share and investment fund holdings and pension assets. Increases in the value of residential real estate made a significant contribution to the change in household net worth, incorporating the effects of a long sustained housing boom. The personal saving rate increased to 1.9%, exceeding the annual rate for 2005 of 1.2%, which helped also contribute to a healthy increase in net worth.
Increases in household assets, however, were partially offset by expanded liabilities. Households’ appetite for debt grew as demand for consumer credit and mortgage funds edged up from the previous quarter. However, the increase in personal disposal income more than offset the increase in household debt, resulting in a debt to income ratio of 108.2 percent in the first quarter, down marginally from the fourth quarter. Canadian households carry about $1.08 in debt, for every dollar of their disposable income. Given the strong growth in household net worth, the ratio of household debt to net worth fell to 17.7% in the quarter.
Household leverage eases
Corporations' debt advances
An increased reliance on borrowed funds in the first quarter was reflected in the levelling off of the non-financial private corporation debt-to-equity (at book value) ratio. Corporations had about 59 cents of debt for every dollar of equity at the end of the first quarter. Corporate leverage has been on a downward trend since 1991.
Government debt-to-GDP at twenty year low
Government net debt (total liabilities less total financial assets) edged down as the government sector registered another surplus in the first quarter, albeit a smaller surplus than the previous quarter. Net government debt as a percentage of GDP declined further to 47.2%, extending a trend of lows last seen twenty year ago when net debt represented roughly half of GDP.