National balance sheet accounts

National net worth stood at $3.9 trillion or $121,900 per capita by the end of the second quarter.

Gain in national net worth tied to slower growth in net foreign debt

National net worth advanced at a faster pace (+1.3%) in the second quarter, the result of a smaller increase in Canada's net foreign liability (what Canadians owe to non-residents less what they owe to us). The rise in net foreign debt was again related to the appreciation of the Canadian dollar, which had a larger impact on Canada's foreign currency-denominated assets than on foreign currency-denominated liabilities.

Wealth advances at a slower pace, in line with a weaker economy

National wealth - the economy's non-financial assets, such as houses, automobiles, land, as well as business inventories and fixed capital - reached $4.1trillion. On a seasonally adjusted basis, growth slowed from 1.7% in the first quarter to 1.5% in the second quarter, in line with a weakened economy. Changes in non-financial assets reflected domestic spending and revaluations due to fluctuations in prices. The extended housing boom continued to support the growth in wealth. Gains in the value of residential real estate reflected the impact of sustained demand in the resale market and continued high levels of construction activity. Business capital and consumer durable goods grew at a slower pace in the second quarter. Inventory stocks declined.

Debt growth dampened by stronger Canadian currency

Total credit market debt (short-term paper, loans, mortgages and bonds) edged up in the second quarter, driven by higher seasonal demand for funds in the household sector, but significantly curtailed by the impact of an appreciating Canadian dollar for the second consecutive quarter. Liabilities denominated in foreign currencies declined in the corporate and government sectors.

Corporate financial positions strengthened further

Lower capital spending coupled with strong undistributed earnings allowed the corporate sector to further expand a significant corporate surplus in the second quarter. This, along with reduction of foreign currency-denominated debt, allowed firms to continue to restructure their balance sheets.

Among non-financial private corporations, the debt-to-equity ratio continued to plummet in the second quarter. This ratio has reached levels not seen since the 1970s. The reduction in leverage in the second quarter was largely the result of earnings combined with a modest demand for funds and the effect of an appreciating dollar. In addition, businesses replaced loans and short-term paper liabilities with bond issues in the second quarter, further extending the downward trend in the ratio of short-term debt to long-term debt. As a result, the growth of current assets continued to outpace that of current liabilities, with liquidity for these corporations increasing steadily since the second quarter of 2000.

Government net debt declined

Government net debt declined in the second quarter. At the federal level, this largely reflected a reduced demand for funds, arising from the surplus recorded in the second quarter. The decline at the provincial government level was partly related a reduction in gross debt - specifically, to the drop in foreign currency denominated liabilities. The increase in the net asset position of social security funds further supported the decline in government sector net debt.

Household net worth advance driven by real estate

Household net worth advanced at a faster pace than in the previous two quarters, led by strong gains in the value of residential real estate, but was partly offset by a sharp rise in debt. This was a continuation of the trend set in 2002, and reflected the boom in the housing market.

The ratio of consumer credit and mortgage debt to personal disposable income rose to a new high of 100.1% (seasonally adjusted), as income growth slowed and borrowing advanced in the second quarter.

Financial asset growth in the personal sector continued to be constrained by declines in pension and mutual fund assets, reflecting, in part, the fall in value of foreign currency-denominated assets of these institutional investors over the last two quarters.

Available on CANSIM: tables 378-0003 to 378-0007.

Definitions, data sources and methods: survey number 1806.

The second quarter 2003 issue of National balance sheet accounts, quarterly estimates (13-214-XIE, $21/$45) is now available.

At 8:30 a.m. on release day, the complete national balance sheet accounts can be obtained on computer diskette. The diskettes (13-214-DDB, $300/$1200) can also be purchased at a lower cost seven business days after the official release date (13-214-XDB, $60/$240). To purchase any of these products, contact the client services officer (613-951-3810; iead-info-dcrd@statcan.gc.ca), Income and Expenditure Accounts Division.

For more information, or to enquire about the concepts, methods or data quality of this release, contact the information officer (613-951-3640), Income and Expenditure Accounts Division.