Financial flow accounts

View the most recent version.

Funds borrowed on financial markets by domestic non-financial sectors increased in the fourth quarter of 2008, to $416 billion (seasonally adjusted at annual rates).

Federal government short-term paper and bond issues accounted for more than 50% of total activity. This was led by a record quarterly issuance of treasury bills, partly in support of the federal government's Insured Mortgage Purchase Program.

Chart 1

Canadian stock exchanges were down again in the fourth quarter. The resource laden Standard & Poor's / Toronto Stock Exchange composite index fell 24%, its largest percentage decline in a decade. The continued fall in commodity prices and demand for energy products did little to support the domestic currency. The Canadian dollar depreciated by 14% in the quarter relative to its US counterpart.

The Bank of Canada's key trend setting rate, the bank rate, was reduced by more than 150 basis points, closing out the quarter at 1.75%. Cuts in the United States were more pronounced during the quarter, as the Federal Reserve funds rate fell to an all-time low of 0.10%.

Government sector

Overall government borrowing increased seven-fold between the third and fourth quarter of 2008. For the first time since the third quarter of 2003, the government sector became a net borrower from the rest of the economy.

The federal government raised $227 billion in the fourth quarter (these are expressed at seasonally adjusted annual rates; on a quarterly basis the government raised $57 billion). About half of this borrowing was linked to the Insured Mortgage Purchase Program, which provided liquidity to Canadian financial markets through the Canada Mortgage and Housing Corporation (CMHC). Treasury bill issues met market demand for liquid investments and also provided funds that were deposited at the Bank of Canada to support its efforts in supporting Canadian financial markets.

Borrowing by other levels of government also picked up during the quarter, reflecting a return to deficit positions (on a national accounts basis) at the provincial and local government levels.

Financial institutions adjust their financial positions

The Bank of Canada provided significant liquidity during the quarter through the increased use of purchase and resale agreements with financial institutions.

Institutional investors reduced their foreign investments in exchange for short-term paper and domestic bonds. Lending institutions also invested heavily in domestic fixed income securities while net new loan issuances slowed. The fourth quarter of 2008 marked the largest ever issuance of National Housing Act Mortgage Backed-Securities, with CMHC acquiring about half under the Insured Mortgage Purchase Program.

Corporate profits declined 20% in the fourth quarter. Savings of non-financial corporations, previously buoyed by high commodity prices, retreated significantly. As a result, the non-financial corporate sector moved into a deficit position, their largest since the fourth quarter of 1999.

Non-financial corporations' new borrowings included a substantial increase in bank loans, as there was a significant drop in activity in both the bond and equity markets.

Household sector

Overall household borrowing slowed to $92 billion during the fourth quarter of 2008, led by dampened growth in consumer credit and mortgages. Net new mortgage borrowing was down more than 6% in the quarter, as the housing market continued to soften, with decreased activity in the resale housing market.

Consumer credit flows were significantly lower in the fourth quarter of 2008, posting their largest quarterly percentage drop in over a decade. Despite this recent slowdown, borrowing has remained at high levels since late 2007. Personal expenditure fell during the fourth quarter with notable declines in new and used motor vehicles.

Products, services and contact information

Detailed analysis and tables

The National economic accounts module, accessible from the home page of our website, features an up-to-date portrait of national and provincial economies and their structure.

More detailed analysis on today's release, including additional charts and tables, can be found in the fourth quarter 2008 issue of Canadian Economic Accounts Quarterly Review, Vol. 7, no. 4 (13-010-XWE, free), from the Publications module of our website.

Financial flow accounts

Available on CANSIM: tables 378-0001 and 378-0002.

Definitions, data sources and methods: survey number 1804.

Detailed printed tables of unadjusted and seasonally adjusted quarterly Financial Flow Accounts (13-014-PPB, $54/$193), including supplementary analytical tables and charts, are now available. To purchase this product, contact Client Services (613-951-3810; iead-info-dcrd@statcan.gc.ca), Income and Expenditure Accounts Division.

The complete quarterly Financial Flow Accounts: Data Tables, Vol. 1, no. 4 (13-020-XWE, free), are also now available from the Publications module of our website.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Media Relations (613-951-4636; mediahotline@statcan.gc.ca), Communications and Library Services Division.