The release of Statistics Canada's Financial Flows

Accounts for the fourth quarter show an expected slowing

of overall credit to Canadian households and firms. With

the quarter's annualized contraction in real GDP of 3.4%

and looking ahead to another three quarters of weakness,

demand for credit was expected to wane. The contractions

in certain channels exhibit the turmoil wrought by the

credit crunch. Outstanding bonds and commercial paper

shrank, demonstrating paralysis in marketable sources of

financing. Non-financial corporations' bonds contracted

by over $3 billion – this channel's largest ever quarterly

decline. With asset markets in disarray during the fall, non-financial corporations' net share issuance fell to its lowest nominal level since 1971, and the fourth quarter plummet in corporate profits was particularly exaggerated

for non-financial corporations, falling an annualized 34%.