Canadian households saw a sharp decline in net worth during the fourth quarter of 2008, with a record drop of 4.4%, or $252 billion, according to Statistics Canada. The per capita household worth fell from $179,300 in the second quarter to $165,300 in the fourth quarter, marking a $14,000 decrease. The federal agency attributed this decline to the turmoil in equity markets, which significantly reduced the value of shareholdings, pension assets, and life insurance holdings.
The decrease in household assets was partially offset by an increase in non-financial assets, particularly residential structures. In comparison, household net worth in the United States fell by 9% in the same period, marking the sixth consecutive quarterly decline. Canada’s benchmark stock index, the S&P/TSX composite, dropped 24% in the fourth quarter from the previous three-month period.
Meanwhile, household debt rose by 1.7% to $1.3 trillion in the fourth quarter, a slower pace than the 2.4% growth seen in the previous quarter. Mortgage borrowing slowed, contributing to the weaker debt growth. Households had 24.5 cents of debt for every dollar of net worth, the agency reported.
Non-financial corporations also saw their debt rise by 1.6% in the fourth quarter, the largest increase since the second quarter of 1990. Reduced earnings and fewer share issues, combined with increased borrowing, led to a substantial increase in the debt-to-equity ratio of these corporations. Despite this, corporate leverage remained at historically low levels.
Governments also increased their borrowing at the end of last year. Ottawa’s debt rose by 14%, primarily due to a record issuance of treasury bills to provide liquidity to financial markets. Other levels of government also increased their borrowing, and the depreciation of the Canadian dollar increased the Canadian dollar value of provincial government liabilities, particularly provincial bonds denominated in U.S. dollars.