The latest figures from the Office of the Superintendent of Bankruptcy Canada released on January 10, 2019 show the number of Canadian businesses and consumers financially going under jumped significantly in November 2018 compared to a year ago.
Alberta continues to lead the nation.
Total insolvencies in Alberta in November 2018 — including bankruptcies and proposals were up 20.2 per cent in comparison to November 2017.
As discussed in our previous post Canadians owe $1.775 in credit market debt, which includes consumer credit and mortgage and non-mortgage loans, for every dollar of household disposable income in the third quarter. Not good. That was up from $177.4 in the second quarter. Spending exceeding income will typically and inevitably ends badly at some point for consumers.
Another dynamic we’ve witnessed is a growing apprehension over the last year of some growingly distressed commercial enterprises having lenders and suppliers hitting the wall with what they can do to help them keep their operations afloat, tightening credit limits and further strangling day to day operations.
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From Bank of Canada Governor Steven Poloz on the issue; “On bankruptcy statistics, I understand that they have picked up. My understanding of the data points is that they’ve picked up from an extraordinarily low level. So, there is, in any point in time, always a certain number of unfortunate folks who may lose their job or what have you and go through this process. And it wouldn’t be surprising to see things pick up a little bit when interest rates have risen.”
In other words ”meh”, from the fine Governor.
The Bank of Canada has said it will likely keep pushing its trend-setting rate higher until it hits the so-called “neutral” level between 2.5 and 3.5 per cent. That would mean between three and seven more quarter-point hikes.