NEW YORK — The market value of Canadian household net worth rose by 1.9 percent ($134 billion) to $7.2 trillion in the first quarter of 2013, RBC Economics reported today.
The gain built off of the 1.4 percent ($107 billion) increase seen in the previous quarter and pushed the aggregate wealth of Canadian households to its highest level on record, said David Onyett-Jeffries, an RBC economist. Per capita net worth was $204,800 in the quarter, which was up from $201,400 in the previous quarter and also represented an all-time high.
The total value of household assets rose 1.6 percent ($140 billion) to $8.9 trillion in the first quarter of 2013 as both financial and non-financial asset values gained in the quarter. The market value of household financial assets (which include cash, equities, bonds, and pension assets) rose 2.3 percent ($109 billion) and were led by a 3.4 percent ($58 billion) rise in the value of equity and investment fund shares as the S&P/TSX composite index rose by 2.5 percent in the first quarter of 2013 to build on gains of 0.9 percent and 6.2 percent in the fourth and third quarters of 2012, respectively.
Non-financial assets rose a modest 0.8 percent ($31 billion) from their the fourth-quarter 2012 levels as the combination of ongoing housing market activity and modestly rising home prices supported a 0.9 percent ($33 billion) increase in the value of total real estate assets in the quarter (real estate accounts for just less than 90 percent of household non-financial assets).
With respect to household financial obligations, total liabilities grew by 0.4 percent ($7 billion) to $1.7 trillion in the first quarter of 2013. The growth in credit market debt outstanding (which includes mortgages, consumer credit, and loans) drove the quarterly increase up by 0.3 percent ($6 billion) in the quarter. The expansion of credit balances was led by a $4 billion (0.4 percent) increase in mortgage debt while consumer credit and other non-mortgage loans outstanding expanded by $2 billion (0.3 percent).
“The growth in asset values and net worth outpaced that of credit on a percentage basis in the quarter, thereby resulting in a second consecutive modest decrease in the household credit market debt-to-asset and debt-to-net worth ratios to 19.0 percent and 23.6 percent, respectively, from 19.3 percent and 23.9 percent in the fourth quarter of 2012,” said Jeffries. “These measures remain below their respective recessionary peaks of 20 percent and 25 percent that were seen in the first quarter of 2009 but continue to hold above their respective pre-recessionary norms of 16 percent and 19 percent.
“As well, household debt growth was slower than that of household disposable income in the first quarter of 2013, pushing the oft-cited debt-to-income ratio down to 161.8 percent from 162.6 percent in the fourth quarter of 2012 and the record high of 162.8 percent recorded in the third quarter of 2012,” he added. “The internationally comparable measure (based on adjustments suggested by Statistics Canada) similarly dipped to 150.5 percent in the first quarter of 2013 from 150.9 percent in the previous quarter.”
The National Balance Sheet Accounts data are consistent with the timelier data from the Bank of Canada and point to an ongoing moderation in the pace of household credit growth, with the year-over-year increase in debt growth in the first quarter of 2013 representing the slowest annual rate since 2001, Jeffries explained.
“Moreover, the improvement in the indicators of Canadians’ financial position is likely to please policymakers and to help alleviate the concerns over the risks excessive household indebtedness pose for the financial system,” he said. “Accordingly, the pressure on the Bank of Canada to counteract these risks by tightening monetary policy is easing. With price pressures remaining limited, we expect that the central bank will keep financial conditions accommodative for the remainder of this year and into next in an effort to support a faster pace of expansion in the Canadian economy.”
U.S. initial claims rise in the week ending June 15
Initial unemployment claims in the United Statesrose by 18,000 to 354,000 in the week ending June 15, thereby retracing most of a cumulative 21,000 drop in the previous two weeks. Market expectations had been for a 340,000 reading, said Nathan Janzen, an RBC economist.
The four-week moving average of initial claims, which better controls for weekly volatility, inched up to 348,250 from 345,750 the previous week and from 340,500 a month ago. Continuing claims dropped by 40,000 to 2,951,000 in the week ending June 8.
The rise in initial claims in the latest week, which also happened to coincide with the payroll employment survey week for June, retraced much of a cumulative 21,000 drop during the two previous weeks but remained only modestly above its level in the May survey week, said Janzen.
“It remained the case that there has been a limited effect on the pace of layoffs from sizeable government sequestration cuts implemented in March,” he explained. “The effect of uncertainty on hiring has also been relatively muted with payroll employment rising by a respectable 175,000 in May, albeit down from the average 206,000 gain during the prior six months. With the level of claims holding broadly steady from May to date, we expect continued respectable growth in employment in June.”
SOURCE: RBC Economics press release