Canada. Household net worth picks up, led by large stock market gains

Household net worth advanced $141 billion to $5.6 trillion in the second quarter, after losing ground in the three previous quarters.

Canadian stock markets recovered partially in the second quarter with the Standard and Poor's / Toronto Stock Exchange composite index up nearly 20%. The resulting increase in the value of household financial assets (including shares, mutual funds, and pension assets) was the principal factor behind the rise in household net worth.

Household credit market debt (consumer credit plus mortgages and loans) advanced at a quicker pace than in the first quarter. This was led by substantial mortgage borrowing related to increased activity in the resale housing markets and an upswing in consumer credit, which reflected a pickup in motor vehicle purchases.

National net worth is national wealth less net foreign liabilities (i.e., what is owed to non-residents less what non-residents owe to Canadians). Alternatively, it is the sum of the net worth of the persons and unincorporated business, corporate and government sectors.

Quarterly series, both book and market value, are available from the first quarter of 1990. Marketable securities are at market value, unless otherwise stated. For more information on the market value estimates, consult the Balance sheet estimates at market value page of our website.

Additional sub-sector tables for the national balance sheet on a market value basis are now available on request (613-951-3640; iead-info-dcrd@statcan.gc.ca). The sub-sectors covered include a number of institutional investors, such as life insurance and pension funds, mutual funds, and chartered banks and near banks. These tables will provide the same level of detail as our existing market value tables, in terms of the financial instruments presented, and will cover the first quarter of 1990 to the second quarter of 2009.

Despite the growth in credit market debt, households debt relative to net worth edged down during the second quarter, as gains in assets more than offset the increase in liabilities. Households had 24.8 cents of debt for every dollar of net worth, compared with 24.9 cents in the first quarter.

Government net debt continues to increase

The net worth of the government sector was largely unchanged in the second quarter, as the gains in the value of assets offset increased liabilities.

The federal government's credit market debt increased by $9.4 billion in the second quarter, with significantly less borrowing activity than in the previous two quarters. Funds raised in the previous two quarters were associated with liquidity initiatives, including the Insured Mortgage Purchase Program.

The credit market debt of other levels of government also rose during the quarter, due to substantial provincial bond and short-term paper issuances. Overall, total government net debt (at book value) as a percentage of gross domestic product increased to 39.8%, from 38.3% in the previous quarter and from 36.0% in the same quarter last year. Nevertheless, it remained well below the 90% range reached in the mid-1990s.

Corporate debt-to-equity ratio down

The net worth of the overall corporate sector declined $208 billion in the second quarter, largely reflecting market driven increases in the value of corporations' equity owned by shareholders, coupled with declines in the value of non-financial assets.

Although bond issuances were strong during the quarter, overall credit market debt of non-financial private corporations was down, led by decreases in loans and short-term paper. Non-financial private corporations' credit market debt-to-equity ratio decreased in the second quarter.

Financial institutions and institutional investor's financial positions improve

Institutional investors, such as trusteed pension plans and mutual funds, witnessed an increase in the value of their marketable securities, with the partial recovery in equity markets in the second quarter. These gains were moderated by losses on foreign currency denominated assets, resulting from a substantial appreciation of the Canadian dollar in the quarter. Financial institutions also recorded increases in loan assets during the second quarter, including mortgages and consumer credit.

Issuances of National Housing Act mortgage-backed securities were significantly lower in the second quarter than in the previous quarter, when the market for these securities was augmented by the Insured Mortgage Purchase Program. This resulted in lower purchases of debt instruments by financial institutions during the quarter.

National net worth

National net worth declined for the second consecutive quarter, and has fallen by $92.9 billion in the first half of 2009.

The change in national net worth reflected continued declines in national saving and an expanded international balance of payments deficit, as well as substantial revaluation effects. The impact of rising foreign equity markets on Canadian institutional investors' international assets was more than offset by the downward revaluation effect on those same foreign currency denominated assets. Canada recorded a net foreign debt position (on a market value basis) in the second quarter, reversing a net asset position posted in the previous quarter.

On a per capita basis, national net worth fell from $178,800 in first quarter to $176,100 in the second quarter.

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