National balance sheet and financial flow accounts, first quarter 2017
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Released: 2017-06-14
National wealth expands on the value of residential real estate and natural resources
National wealth, the value of non-financial assets in the Canadian economy, rose 1.9% to $10,258.5 billion at the end of the first quarter. The main contributors to growth were residential real estate and natural resources. The value of residential real estate grew by $89.5 billion, while the value of natural resource wealth increased $73.9 billion, reflecting higher crude oil prices at the end of the first quarter.
National net worth, the sum of national wealth and Canada's net foreign asset position, increased 2.6% to $10,506.5 billion by the end of the first quarter. This increase was due to both higher national wealth and a gain in Canada's net international investment position, as Canada's international assets continued to grow at a faster pace than Canada's liabilities with non-residents. On a per capita basis, national net worth was $287,000 at the end of the first quarter, compared with $280,600 at the end of 2016.
Canada's net foreign asset position rose by $75.6 billion in the first quarter to $247.9 billion, a third consecutive quarterly increase. Canada's international assets have now exceeded international liabilities for 10 straight quarters.
Chart 1
National wealth components
Financial assets drive increases in household net worth
Household sector net worth at market value rose 2.2% in the first quarter to $10,533.6 billion. On a per capita basis, household net worth was $287,700. The leading contributor was a 2.3% increase in financial assets, as the value of equity and investment fund shares, particularly mutual funds, reflected continued strength in international and domestic equity markets. Non-financial assets grew 1.7% over the previous quarter and represented a 7.7% gain over the previous year, reflecting the strength of the Canadian real estate market.
The ratio of total household credit market debt to gross domestic product (GDP) fell to 99.5% in the first quarter from 100.0% in the previous quarter. Total household credit market debt (consumer credit, and mortgage and non-mortgage loans) reached $2,041.1 billion in the first quarter. Consumer credit was $595.3 billion, while mortgage debt stood at $1,341.5 billion. The share of mortgage liabilities to total credit market debt edged up from 65.6% at the end of 2016, to 65.7%.
Household credit market debt as a proportion of household disposable income (adjusted to exclude pension entitlements) fell from 167.2% in the fourth quarter to 166.9%, as household income (+0.9%) rose at a faster pace than household credit market debt (+0.7%). In other words, there was $1.67 in credit market debt for every dollar of household disposable income. Leverage, as measured by the ratio of household debt to assets, edged down from 16.6% at the end of the fourth quarter to 16.4% at the end of the first quarter.
Chart 2
Household sector leverage indicator: Debt to total assets
Household demand for funds declines
On a seasonally adjusted basis, households borrowed $27.5 billion in the first quarter, down slightly from $27.6 billion borrowed the previous quarter. Mortgage borrowing increased $2.7 billion from the fourth quarter to $20.9 billion, while borrowing in the form of consumer credit and non-mortgage loans declined $2.8 billion to $6.5 billion.
The household debt service ratio, measured as total obligated payments of principal and interest as a proportion of household disposable income edged up from 14.1% in the fourth quarter to 14.2% in the first quarter. The interest-only debt service ratio, defined as household mortgage and non-mortgage interest paid as a proportion of adjusted household disposable income, stood at 6.1%, down slightly from the previous quarter. The household savings rate decreased from 5.3% in the fourth quarter to 4.3% in the first quarter.
The historically low interest rate environment prevailing since 2008 has allowed the household sector to increase mortgage principal payments. At the end of the first quarter, the portion that households spent on mortgage principal payments exceeded that spent on mortgage interest payments—the first time this has happened since these statistics were first compiled for the first quarter of 1990.
Chart 3
Household mortgage interest and principal payments
Provincial and federal governments increase borrowing
The federal government recorded $2.0 billion in net issuances of Canadian bonds in financial markets in the first quarter, partially offset by $1.6 billion in retirements of short-term paper. Conversely, net borrowings of the provincial governments amounted to $8.0 billion in the quarter. The bulk of the borrowing was composed of $12.5 billion in net issuances of Canadian bonds and debentures, and was partially offset by $9.8 billion in retirements of short-term paper.
The ratio of federal government net debt (book value) to GDP edged down from 30.8% at the end of the fourth quarter to 30.7% at the end of the first quarter. On the other hand, the ratio of provincial government net debt (book value) to GDP edged up from 24.2% to 24.3% over that same period.
Sharply higher demand for funds by non-financial private corporations
Non-financial private corporations' demand for marketable funds increased substantially, from a $11.4 billion financing requirement in the fourth quarter to $53.5 billion in the first quarter. The pace of borrowing rose for almost all components, reflecting stronger mergers and acquisitions activity and higher capital investment financing requirements. New issues of equity increased from $5.4 billion to $35.4 billion, non-mortgage loans rose from $3.8 billion to $10.1 billion, and $2.2 billion of short-term paper was issued in the first quarter compared with a redemption of $8.6 billion in the fourth quarter.
On a book value basis, the credit market debt-to-equity ratio of non-financial private corporations decreased from 71.5% in the fourth quarter to 68.8% at the end of the first quarter. This represented 69 cents of credit market debt for every dollar of equity, compared with 72 cents at the end of the previous quarter.
Chart 4
Private non-financial corporate credit market debt-to-equity ratio (book value)
Financial corporations' assets increase
The value of financial assets of financial corporations increased 1.6% by the end of the first quarter to $13,441.8 billion. The principal contributors to growth were increases in domestic and foreign equity and in investment fund shares, reflecting continued strength in international and domestic equity markets.
Overall, the financial sector provided $39.7 billion of funds to the economy through financial market instruments on a net basis, a decrease from the previous quarter's value of $64.4 billion. This decline in net lending activity was mainly the result of a $26.9 billion drop in net investment in corporate bonds, falling from $47.1 billion in the fourth quarter to $20.2 billion in the first quarter.
In celebration of the country's 150th birthday, Statistics Canada is presenting snapshots from our rich statistical history.
Historical perspective on Canada's household net worth
In 2016, household net worth stood at $282,200 per capita, more than four times the 1990 level of $67,600.
Household net worth reflects the value of all financial and non-financial assets held by households such as real estate, mutual funds, and bank deposits less the value of their liabilities, such as mortgages and consumer credit.
Although there was a significant change in the level of net worth over the last 26 years, the proportions of asset components held by Canadian households have not changed significantly. Financial assets increased slightly from 60% of total net worth in 1990 to 63% in 2016. However, in the period since 1990, there has been a significant reduction in the holdings of currency and deposit assets, as well as debt securities, in favour of equities within the portfolio of financial assets.
Real estate, the value of residential structures and land, represented the largest component of the non-financial assets throughout the period. In 2016, real estate represented 50% of net worth, compared to 43% in 1990.
For total liabilities, the proportions were unchanged, representing 20% of net worth in both years. In other words, households are holding proportionally as much debt relative to their net worth in 2016 as they held in 1990, with little change in its composition. Mortgage debt accounted for 13% of net worth in both time periods. Consumer credit represented 6% of net worth in 2016, a slight increase from the 1990 share of 5%.
Chart 5
Proportions of household net worth: 1990 versus 2016
Note to readers
This release of the financial and wealth accounts is comprised of the national balance sheet accounts (NBSA), financial flow accounts (FFA), and other changes in assets accounts (OCAA).
The NBSA 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. The NBSA cover all national non-financial assets and financial asset-liability claims outstanding in all sectors. To improve the interpretability of the estimates of the financial flows, selected household borrowing series are available on a seasonally adjusted basis (CANSIM table 378-0127). All other data are unadjusted for seasonal variation. For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.
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 issuances 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.
While the financial flow accounts record changes in financial assets and liabilities between opening and closing balance sheets that are associated with transactions during the accounting period, the value of assets and liabilities held by an institutional unit can also change for other reasons. These other types of changes, referred to as other economic flows, are recorded in the other changes in assets account.
There are two main components to this account. One is the other changes in the volume of assets account. This account includes changes in non-financial and financial assets and liabilities relating to the economic appearance and disappearance of assets, the effects of external events such as wars or catastrophes on the value of assets and changes in the classification and structure of assets. The other main component is the revaluation account, showing holding gains or losses accruing to the owners of non-financial and financial assets and liabilities during the accounting period as a result of changes in market price valuations.
At present, only the aggregate other change in assets is available within the Canadian System of Macroeconomic Accounts; no details are available on the different components.
Definitions concerning financial indicators can be found in Financial indicators from the National Balance Sheet Accounts in the System of macroeconomic accounts glossary.
Revisions
This first quarter release of the national balance sheet and financial flow accounts includes revised data for the first quarter of 2016 to the fourth quarter of 2016. These data incorporate new and revised data, as well as updated data on seasonal trends.
Additional information on the treatment of natural resource wealth in the National Balance Sheet Accounts is available in the article "Natural resource wealth statistics in the National Balance Sheet Accounts."
Next release
Data on the national balance sheet and financial flow accounts for the second quarter of 2017 will be released on September 15, 2017.
Products
The System of Macroeconomic Accounts module features an up-to-date portrait of national and provincial economies and their structure.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available. This publication will be updated to maintain its relevance.
Contact information
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