Household sector net lending reaches a record in Canada

Household credit market debt as a proportion of household disposable income fell from 175.4 per cent to 158.2 per cent

Household sector net lending reached a record $69 billion in the second quarter, according to new data released Friday by Statistics Canada.

“Although compensation of employees dropped considerably, this was more than offset by a significant expansion in government transfers to households meant to blunt the impact of the COVID-19-related measures; the result was a 10.8 per cent increase in household disposable income. This increase, coupled with a 13.7 per cent decline in household spending (in nominal terms), pushed the household saving rate to 28.2 per cent from 7.6 per cent in the previous quarter and 3.6 per cent in the fourth quarter of 2019,” said the federal agency.

It said household sector net worth, the value of all assets less liabilities, increased 5.0 per cent to $11,956.2 billion in the second quarter, a record rebound following the record decline in the first quarter of 2020. The value of financial assets rose $501.0 billion; upward revaluations made up $423.5 billion of this rise, while net acquisitions of financial assets accounted for $77.5 billion. Equity and investment funds were the main contributor to the increase in financial assets, rising $308.1 billion and recovering a sizeable portion of losses from the first quarter. Similarly, the Toronto Stock Exchange increased 16.0% following a 21.6 per cent drop one quarter earlier. Meanwhile, financial liabilities edged up 0.4 per cent, added StatsCan.

“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, dropped from 14.54 per cent to 12.40 per cent, the largest decline on record . . . Household credit market debt as a proportion of household disposable income fell from 175.4 per cent to 158.2 per cent, as household disposable income increased 10.8 per cent and the stock of credit market debt remained relatively unchanged. In other words, there was $1.58 in credit market debt for every dollar of household disposable income,” it said.

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