The Conference Board of Canada’s Economist Joseph Kahenga offers the following insights on today’s National Balance Sheet and Financial Flows data:
Resilience in the labour market coupled with the current degree of monetary stimulus has encouraged households to one again increase their use of credit. While this trend could translate into higher household consumption spending, the increase in financial vulnerabilities will be closely monitored by the Bank of Canada as it re-evaluates its current monetary policy stance.
- The significant decline in the value of energy products and timber weighed on national wealth as it slightly inched down 0.2 per cent to $11,783.3 billion in the third quarter.
- However, higher equity prices pushed Canada’s net international investment position up by $30.6 billion to reach $839.1 billion offsetting the contraction in national wealth. As a result, national net worth stood unchanged at $12,622.4 billion relative to its level in the previous quarter.
- Households saw their net worth edge up 0.9 per cent, marking the third consecutive increase. This was mainly attributable to the upward trend in the value of total assets which outpaced growth in total liabilities during the quarter.
- On a seasonally adjusted basis, household borrowing accrued $6.8 billion to reach $28.5 billion thanks to higher demand for consumer credit and mortgage loans. Non-mortgage debt soared in the third quarter reversing its recent downward trend.
- With the current increase in borrowing, household debt as a proportion of household disposable income rose 50 basis points to 175.9 per cent, the first increase in five quarters as debt grew slightly faster than disposable income.
- Federal government net det to GDP ratio continued to tick lower to 26.4 per cent as growth in GDP outpaced growth in the federal government net debt. This improvement stands in contrast to the rising ratio of other levels of government which increased to 27 per cent.
- Third quarter also posted an acceleration in lending activities within the financial sector where $95 billion in funds were supplied to the economy through financial market instruments. The growing momentum in financing activities was supported mainly by bond issuances, non-mortgage and mortgage loans.
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