National balance sheet accounts

National net worth reached $4.2 trillion by the end of the third quarter, or $131,100 per capita.

Growth in national net worth slowed

National net worth edged up 0.5% in the third quarter, slowing markedly from the second quarter (+2.7%). While national wealth grew, these gains were largely offset by a sharp increase in net foreign debt, which resulted from the impact of valuation changes brought about by a stronger Canadian currency.

While slowing from the 1.7% increase of the second quarter, national wealth grew 1.5%, exceeding the average growth of the previous 10 quarters. A combination of increased investment and higher prices of residential real estate assets accounted for more than half of the increase in the third quarter. Build up in inventories also had an impact, as corporations invested heavily in inventories.

Canadians' net indebtedness to non-residents grew sharply in the quarter, as the value of Canadian direct and portfolio investments abroad declined more than the value of Canadian liabilities to non-residents. While net transaction flows of Canadian direct and portfolio investments abroad were positive, they were more than offset by reductions of foreign currency denominated assets related to a stronger Canadian dollar. The Canadian dollar advanced against the US dollar and all other major currencies in the third quarter.

Change in household net worth driven by real estate

Growth in household net worth slowed to 0.9% in the quarter. While gains in household residential real estate assets were the largest contributor to growth in national wealth, growth decelerated from the second quarter. In addition, financial asset growth slowed.

Demand for funds also slowed, but only marginally. As a result, households had $105.1 in debt (consumer credit and mortgages) for every $100 of their disposable income, an increase from the second quarter. The ratio of household debt to net worth also increased for the second consecutive quarter, but household sector leverage remained relatively low with debt representing 20.4% of net worth by quarter end.

Corporate debt-to-equity continued falling trend

Since 2000, corporations have generated more funds from internal operations each quarter than they required to finance non-financial capital investment. As a result of this string of surpluses, the corporate sector has been a net lender to the rest of the economy and has used these funds to restructure their balance sheets, largely through paying down debt. For non-financial private corporations, this was facilitated in the third quarter by a weaker demand for funds and by the impact on foreign currency debt of a strengthening of the Canadian dollar. The ratio of debt to equity (book value) continued its downward trend, reaching a new low in the third quarter as it has done in each quarter over the last three years.

Government debt-to-GDP at 20 year low

Government net debt (total government financial assets minus total government financial liabilities on a book value basis) dropped sharply, reflecting both an overall government sector surplus position in the third quarter as well as the reduction of foreign currency denominated government debt related to the appreciation of the Canadian currency. Net government debt as a percentage of GDP fell for the 11^th consecutive quarter and has reached levels last seen 20 years ago.

Available on CANSIM: tables 378-0003 to 378-0010.

Definitions, data sources and methods: survey number 1806.

The third quarter 2004 issue of National Balance Sheet Accounts, Quarterly Estimates, Vol. 2, no. 3 (13-214-XIE, $23/$49) is now available.

The third quarter 2004 issue of Canadian Economic Accounts Quarterly Review (13-010-XIE, free), is available online. From the Our products and services page, under Browse our Internet publications, choose Free, then National accounts.

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, $321/$1,284) can also be purchased at a lower cost seven business days after the official release date (13-214-XDB, $65/$257). 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.