National net worth continues to fall despite rebound in international investment position

Canada’s national net worth, the sum of national wealth and Canada’s net foreign asset position, dropped 2.4 per cent from the third quarter to $16,769.7 billion at the end of the fourth quarter. This followed a decrease of $602.2 billion (-3.4 per cent) in the third quarter, which was the largest quarterly decline since the fourth quarter of 2008, reported Statistics Canada on Monday.

“Compared with the end of 2021, national net worth was down 3.4 per cent by the end of 2022. However, since the end of 2019, national net worth has expanded 34.8 per cent, more than double the pace of growth over the three-year period up to the end of 2019 (+15.4 per cent),” said the federal agency.

“The total value of non-financial assets in Canada, also referred to as national wealth, declined 3.9 per cent from the third quarter to $15,930.0 billion in the fourth quarter of 2022, the largest quarterly decrease since the end of 2008. This was attributable to a $615.2 billion decline in the value of Canada’s natural resources (excluding land). After jumping almost $900 billion in the first two quarters of 2022, the value of natural resources finished the year down $87.6 billion, as resource wealth returned to valuations seen late in 2021.

“Deepening the decline in national wealth, the value of residential real estate continued to fall for a third consecutive quarter, down $109.2 billion to $8,240.6 billion in the fourth quarter of 2022. However, the drop in the value of residential real estate was less pronounced than those recorded in the second and third quarters of 2022.”

In the fourth quarter, seasonally adjusted household compensation (nominal terms) grew by a modest 1.2 per centfrom the third quarter. Overall, growth in household disposable income (+3.0 per cent) was nearly double that of household consumption (+1.6 per cent), which boosted household net savings and consequently pushed the savings rate up to 6.0 per cent in the fourth quarter, well above the 2.8 per cent rate recorded in the fourth quarter of 2019, said the report.

“Household sector net worth—the value of all assets minus all liabilities—rose $181.0 billion or 1.2 per cent from the third quarter to reach $15,320.4 billion in the fourth quarter. This followed two quarters of notable declines in which weakening bond, equity and housing markets combined to dampen household wealth. In the fourth quarter, household wealth was buoyed by recovering equity markets despite the continued drag from falling house prices. Household sector net worth ended the year 4.7 per cent lower than 2021, as households relinquished roughly one-third of the gains in wealth recorded over 2021. Annual declines in both the value of financial and non-financial assets combined with consistently growing liabilities put downward pressure on household net worth in 2022,” it said.