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National wealth decreases in Canada from $304,085 to $296,933 per capita

Staff Writer |
National wealth, the value of non-financial assets in the Canadian economy, declined 2.2% to $11,080.6 billion at the end of the fourth quarter.

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This was primarily due to a 23.5% decrease in the value of natural resources.

The value of natural resources was affected by weaker crude oil prices in the fourth quarter, which have more recently rebounded in the first two months of 2019.

A decline in the value of residential real estate (-$72.5 billion) also contributed to the fourth quarter decrease, as housing prices continued to edge down.

On a per capita basis, national wealth fell from $304,085 to $296,933.

Canada's net foreign asset position decreased by $109.1 billion to $528.6 billion in the fourth quarter, after reaching a record high of $637.7 billion at the end of the third quarter.

This decline mainly reflected the weaker performance of foreign stock markets relative to the Canadian stock market, which lowered the value of Canada's international assets in equity instruments relative to international liabilities.

National net worth, the sum of national wealth and Canada's net foreign asset position, decreased 3.0% to $11,609.2 billion at the end of the fourth quarter.

The household sector's net worth declined 2.8% to $10,735.6 billion in the fourth quarter.

This was mainly the result of a lower market value for financial assets (-3.2%), which was led by a 7.5% decrease in the value of equity and investment fund shares.

Weaker domestic and foreign stock markets, especially toward the end of the quarter, were a major factor behind the decrease; however, the first two months of 2019 have shown signs of recovery.

The value of non-financial assets fell 1.0% to $6,187.1 billion in the fourth quarter, led by a 1.4% decline in the value of residential real estate.

This was the weakest quarter for residential real estate since the fourth quarter of 2008.

The value of residential real estate posted its first annual decrease in 2018 since the start of the time series.

Total sales of residential real estate fell 14.7% in 2018.

Chart 2 Chart 2: Household mortgage interest and obligated principal

ayments

Household mortgage interest and obligated principal payments

Chart 2: Household mortgage interest and obligated principal payments The decline in household assets and the increase in liabilities (+0.9%) resulted in a rise in the debt-to-asset ratio, which reached 17.3% in the fourth quarter.

The ratio of household financial assets to non-financial assets declined to 109.8% in the fourth quarter, as financial assets fell at a faster pace.

On a seasonally adjusted basis, total credit market borrowing edged up in the quarter compared with the previous quarter, as households borrowed $21.2 billion.

While demand for consumer credit and non-mortgage loans was down, mortgage loan demand rose $2.3 billion to $12.3 billion.

Despite the increase in the fourth quarter, on an annual basis, household credit market borrowing was down 19.5% to $84.6 billion in 2018, the lowest level of borrowing since 2014.

Credit market debt (consumer credit, and mortgage and non-mortgage loans) totalled $2,209.3 billion in the fourth quarter.

Mortgage debt reached $1,439.9 billion, while consumer credit and non-mortgage loans combined stood at $769.4 billion.

The household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, increased to 14.9% in the fourth quarter, as growth in total debt payments outpaced the growth in disposable income.

Household credit market debt as a proportion of household disposable income increased to 178.5% in the fourth quarter, with growth in debt slightly outpacing income growth.

In other words, there was $1.79 in credit market debt for every dollar of household disposable income.

The federal government demand for credit market debt was $3.6 billion in the fourth quarter.

This included $2.1 billion in net issuances of bonds and $1.1 billion in net issuances of short-term paper.

On an annual basis, the federal government demanded $5.9 billion of funds in 2018, a sharp decrease from $17.0 billion in 2017.

This decline was accentuated by $4.2 billion in net retirements of bonds, the first such annual occurrence since 2007.

Over the course of 2018, non-residents recorded $38.5 billion of net sales and redemptions of federal government bonds.

The demand for funds by other levels of government totalled $10.6 billion in the fourth quarter, most of which was in the form of net issuances of bonds and debentures (+$5.4 billion).

In 2018, other levels of government demanded $44.6 billion, up slightly from $43.1 billion in 2017.

Despite slower economic growth in 2018, the ratio of federal government net debt (book value) to gross domestic product (GDP) improved to 26.9% in the fourth quarter, as federal government borrowing slowed more than GDP.

The ratio of other government net debt (book value) to GDP surpassed the federal government ratio for the second consecutive quarter, edging up from 27.3% in the third quarter to 27.6% in the fourth quarter.

The demand for funds by non-financial private corporations was $46.5 billion in the fourth quarter, up from $32.4 billion in the third quarter.

Throughout the year, non-financial private corporations posted strong demand for non-mortgage loans.

On an annual basis, demand for funds by non-financial private corporations totalled $165.1 billion in 2018, down from $193.5 billion in 2017.



Chart 5 Chart 5: Borrowing by private non-financial corporations

Borrowing by private non-financial corporations

Chart 5: Borrowing by private non-financial corporations Non-financial private corporations' debt-to-equity ratio (book value) edged up in the fourth quarter to 72.2%.

Over the course of 2018, non-financial private corporations' debt-to-equity ratio increased by 4.7 points.

The financial sector injected $43.5 billion of funds into the economy through financial market instruments in the fourth quarter, down from $85.9 billion in the third quarter.

Fourth quarter financing was mostly attributable to non-mortgage (+$28.8 billion) and mortgage (+$15.5 billion) loans, with chartered banks providing most of these funds to non-financial private corporations and households.

Among financial corporations, the decline in stock market prices also affected the market value of financial assets, which fell 1.1% in the fourth quarter to $14,043.3 billion.

This decrease was attributable to downward revaluations and other volume changes of $326.6 billion, mainly in equity.

Institutional investors, such as trusteed pension plans, mutual funds, segregated funds and life insurance, recorded these downwards revaluations.

This impact was also felt in the household sector, as households hold a large share of equity in these institutions.


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