Canadian national net worth rose more than C$9B in Q3 to C$6.8T, or C$194,000 per capita
December 13, 2012
– National net worth and wealth
National net worth increased by over $9 billion to $6.8 trillion in the third quarter, translating to $194,100 on a per capita basis. In addition to higher prices for many assets, national saving and revaluations contributed to increased national wealth. National saving reflected sustained saving by the corporate sector.
The increase in Canada's net foreign indebtedness dampened the gain in national net worth in the third quarter. Higher net foreign debt was largely a result of increased Canadian borrowing from abroad and a decrease in the value of Canadian investment abroad denominated in foreign currency, the latter reflecting the appreciation in the Canadian dollar.
The resulting rise in national net worth was largely attributable to higher values of non-financial assets in the third quarter. National wealth advanced almost $63 billion to $7.1 trillion at the end of the third quarter, an increase of 0.9% compared with the 1.3% advance in the previous quarter. Housing investment slowed during the quarter but residential real estate still contributed materially to the increase in national wealth.
New household borrowing was $27.3 billion in the third quarter. Mortgages increased $18.4 billion to $1.1 trillion, albeit increasing at a slower pace than in the previous quarter. Consumer credit levels reached $474 billion in the third quarter versus $467 billion in the second quarter.
Owner's equity as a percentage of real estate edged down to 69.0% in the third quarter, as mortgage debt increased relatively more than the value of real estate. Leverage as measured by household credit market debt to disposable income, increased from 163.3% in the second quarter to 164.6% in the third quarter, a smaller quarterly increase than seen in the previous quarter.
Household net worth was up 1.0% in the third quarter, led by gains in the values of equity holdings (including mutual funds) and pension assets. The increase in equities reflected a 6.2% rise in the Standard and Poor's / Toronto Stock Exchange composite index in the quarter, rebounding from a 6.4% decrease in the previous quarter. The value of household real estate increased $24 billion in the third quarter. On a per capita basis, household net worth rose to $197,800 in the third quarter, from $196,400 in the previous quarter.
Total government net debt (expressed at book value) rose to $865.8 billion in the third quarter from $847.9 billion in the second quarter. The ratio of total government net debt to gross domestic product (GDP) continued to trend upward, increasing slightly from 47.3% in the second quarter to 48.0% in the third quarter.
Slowing demand for funds by private non-financial corporations in the quarter was reflected in reduced borrowing via debt instruments while share issuance increased. On a book value basis, corporations had about 54 cents of credit market debt for every dollar of equity in the third quarter, a decline from the second quarter. Leverage has been trending downward for corporations since the early 1990s, related to a trend towards increased undistributed corporate profits.
Non-financial corporation gross saving outpaced non-financial capital acquisition in the third quarter. The corporate sector remained a net lender to the rest of the economy, mainly reflecting continued strong internally-generated funds (undistributed corporate profits).
Financial institutions saw their financial assets increase in value to $9.2 trillion, a quarterly increase in excess of $200 billion. More than a third of this increase was from the gain in the value of equities, reflecting the turnaround in the Toronto Stock Exchange in the third quarter. The downward revaluation of foreign currency denominated investments, resulting from the appreciation of the Canadian dollar, dampened the growth in financial assets.
Funds raised on financial markets and credit market debt
Total funds raised by domestic non-financial sectors on financial markets amounted to $62.5 billion in the third quarter. Households continued to account for the largest share of the private sector demand for funds, a trend that emerged in 2004. The overall government sector demand for funds was lower, led by non-federal levels of government.
Credit market debt (consumer credit, mortgages, loans, short-term paper and bonds) of domestic non-financial sectors totaled $4.0 trillion in the third quarter, up 1.4% from the previous quarter. Combined bonds and mortgage debt outstanding reached $2.7 trillion, accounting for more than two-thirds of total non-financial sector credit market debt outstanding.