Households drive gains in Canada's net worth, aided by a weaker loonie

Canadian national net worth increased 2.0%(q/q) in the first quarter of 2015, driven by rising household wealth. A weaker Canadian dollar is helping out Canada's net worth picture, as investments abroad translate into more loonies back in Canada. Excluding the effects of changes in the currency, Canada's national wealth remained essentially unchanged.

In yesterday's Financial System Review, the BoC cited the elevated level of household indebtedness as the number one vulnerability to Canada's financial system. In the Bank's view, this vulnerability has edged higher recently. While the ratio of debt-to-income eased slightly in Q1, that is unlikely to change the level of the Bank's concern. Growth in personal disposable income can be quite volatile on a quarter-to-quarter basis, and the very slight decline in the ratio really looks more like a plateau than the beginning of a trend decline. Moreover, lower interest rates have led to Canada's housing market heating up this spring, which will likely lead to an acceleration in debt growth in Q2.

"Rising corporate leverage in Canada's nonfinancial sector bears watching. While it remains low relative to levels of the past 25 years, it has been accelerating quite rapidly on strong borrowing activity by Canadian corporations. This has not yet been accompanied by an increase in business investment in Canada." said TD Economics