National balance sheet and financial flow accounts, third quarter 2014
National net worth
National net worth rose 2.8% from the second quarter to $8,117 billion in the third quarter. Similarly, on a per capita basis, national net worth rose 2.4% to $227,500.
National wealth, or the total value of non-financial assets in the Canadian economy, rose 1.6% to $8,092 billion at the end of the third quarter, accounting for roughly half of the growth in national net worth. Gains in the value of residential and non-residential real estate led the growth.
Also contributing to the gain in net worth was a $94.5 billion increase in Canada's international investment. Canada returned to a net asset position of $25.6 billion at the end of the third quarter. The decline in net foreign debt was largely attributable to a weaker Canadian dollar, which raised the value of Canada's international assets relative to the value of its international liabilities.
Household net worth rose 1.3% in the third quarter, following a 2.2% gain in the previous quarter. Non-financial assets were up 1.8%, led by an increase in the value of real estate. These gains were dampened by subdued growth in the value of financial assets, primarily equities (+0.2%), as domestic equity markets weakened. On a per capita basis, household net worth was $232,200 in the third quarter.
At the end of the third quarter, the ratio of financial assets to non-financial assets stood at 120.0%, a decrease from the previous quarter as growth in non-financial assets outpaced growth in financial assets. Since 2009, when equity prices declined sharply relative to non-financial assets such as real estate, the value of financial assets has experienced more frequent periods of significant growth. Consequently, the ratio of financial assets to non-financial assets has been generally increasing.
Households borrowed $27.4 billion in the third quarter, principally mortgages. Total household credit market debt (consumer credit, mortgage, and non-mortgage loans) rose 1.5% to $1,805 billion at the end of the third quarter, matching the gain of the previous quarter. Consumer credit debt increased 0.9% to $515 billion, while mortgage debt was up 1.8% to $1,171 billion.
Disposable income increased at a slower rate than household credit market debt in the third quarter. As a result, leverage, as measured by household credit market debt to disposable income, reached 162.6% in the third quarter, versus a revised 161.5% in the previous quarter. In other words, households held roughly $1.63 of credit market debt for every dollar of disposable income in the third quarter. The household credit market debt to disposable income ratio was revised downward, from the first quarter of 2011 to the second quarter of 2014, as part of the regular national balance sheet and financial flow accounts annual revision process. The revision was due to new information received that led to a downward revision to the value of mortgages owed by households.
The household debt service ratio, defined as household mortgage and non-mortgage interest paid as a proportion of disposable income, edged down to an all-time low of 6.8% in the third quarter. The mortgage debt service ratio and consumer credit debt service ratio both declined in the quarter.
Household owner's equity as a percentage of real estate reached 70.8% at the end of the third quarter, largely unchanged from the previous quarter as the value of household real estate and mortgage debt increased at an equal rate.
By the end of the third quarter, the overall government deficit stood at $7.2 billion compared with $10.4 billion in the third quarter of 2013. Total government borrowing was $8.8 billion in financial markets during the third quarter, led by $10.9 billion in net issuances of government bonds.
The federal government was a net lender in the third quarter ($1.8 billion), a smaller net lending position than in the previous quarter, while other levels of government remained net borrowers. The federal government recorded net retirements of Canadian short-term paper that outweighed their net issuances of bonds and debentures, while other levels of government were net issuers of both forms of debt.
The ratio of federal government net debt (expressed at book value) to gross domestic product declined from the previous quarter to 31.5%. This was higher than the low of 28.5% recorded during the fourth quarter of 2008. Since late 2008, the ratio for other levels of government has followed a steady upward trend, reaching 30.3% in the third quarter.
Financial corporate net lending amounted to $7.7 billion in the third quarter, compared with $4.7 billion in the third quarter of 2013. The financial sector provided $54.4 billion of funds to the economy, principally in the form of loans, mortgages and increased holdings in investment securities.
Financial assets of financial corporations were up 0.4% in the third quarter to $10,623 billion. The increased value of foreign securities, both foreign bonds (+9.5%) and foreign equities (+4.1%), helped lead the growth in total financial assets. Lending, especially in mortgage loans, also contributed to the increase in financial assets. Total loans grew 1.5% in the quarter, up from the 0.7% increase in the previous quarter. Total financial liabilities of financial corporations increased 0.6% from the second quarter, led by a 2.0% advance in currency and deposit liabilities that was partially offset by a decrease in equity liabilities (-0.9%).
Notably, financial assets of mutual funds rose 2.2% in the third quarter. Increases in both domestic and foreign equities of mutual funds resulted in a 2.8% rise in overall equity investments.
The non-financial private corporate sector was a net lender of $9.5 billion in the third quarter, compared with net lending of $6.2 billion in the third quarter of 2013. Non-financial private corporations borrowed $23.1 billion worth of funds in financial markets during the third quarter, led by non-mortgage loans.
Non-financial assets increased 1.5% in the third quarter, led by non-residential structures (+1.4%). Total financial liabilities decreased 1.6%, primarily because of a 4.0% decline in the market value of domestic equity liabilities.
On a book value basis, the credit market debt to equity ratio of non-financial private corporations was 59 cents of credit market debt for every dollar of equity at quarter end, up from 57 cents in the previous quarter. The ratio increased as total credit market debt rose at a faster pace than the value of equity.
Households and non-profit institutions serving household sector indicators – Market value, not seasonally adjusted
Note to readers
This is a combined release of the National balance sheet accounts and Financial flow accounts (FFA). The National balance sheet accounts are composed of the balance sheets of all sectors and subsectors of the economy. The main sectors are households, non-profit institutions serving households, financial corporations, non-financial corporations, government, and non-residents. They cover all national non-financial assets and financial asset-liability claims outstanding in all sectors. All data are unadjusted for seasonal variation.
The FFA articulate net lending or borrowing activity by sector by measuring financial transactions in the economy. The FFA arrive at a measure of net financial investment, which is the difference between transactions in financial assets and liabilities (for example, net purchases of securities less net issuance of securities). The FFA also provide the link between financial and non-financial activity in the economy, which ties estimates of saving and non-financial capital acquisition (for example, investment in new housing) with the underlying financial transactions.
Definitions concerning financial indicators can be found in "Financial indicators from the National Balance Sheet Accounts" and in the System of macroeconomic accounts glossary.
The System of macroeconomic accounts module, accessible from the Browse by key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.
Links to other releases from the national accounts can be found in the third quarter 2014 issue of Canadian Economic Accounts Quarterly Review, Vol. 13, no. 3 (Catalogue number13-010-X). This publication is available from the Browse by key resource module of our website under Publications. The revised National balance sheet and financial flow accounts for the first quarter have been released, along with those for the second quarter. These data incorporate new and revised source data and updated data.
Data on the National balance sheet and financial flow accounts for the fourth quarter of 2014 will be released on March 12, 2015.
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