In the face of five interest rate increases during the past year and a half, the Office of the Superintendent of Bankruptcy Canada released a report showing the number of consumer insolvencies in November 2018 rose by 5.2 percent from a year ago, accounting for 97.2 percent of total insolvency filings, while business insolvencies increased by 8.9 percent.
Business insolvencies decreased by 0.6 percent compared with the 12-month period a year prior, with the mining, oil, and gas extraction and manufacturing sectors falling the most, while construction and retail insolvencies sustained the greatest increases. Last year, the federal government’s fall economic statement projected two percent growth for 2019, which many predict will be lower due to low oil prices.
The number of insolvencies rose in all provinces except Nova Scotia in November compared with the same period a year earlier. Newfoundland and Labrador's filings rose 11 percent, followed by Alberta at 8.3 percent. Quebec and Ontario grew by less than 1 percent.
The combination of high household debt, rising interest rates, and slowing wage growth has been "terrible" for about half a year since early in 2018, said Director of Economics for the Conference Board of Canada Matt Stewart. He said higher interest rates have delivered a hit to household spending, which has been the primary driver of Canada's good economic fortunes. "It's been a long time since we've had a recession. As of yet, I think most of the news is still positive, but there is a growing amount of risks," he added.
Therefore, business investment is seen as the next critical source of growth, however Mr. Stewart said the transition has yet to materialize because investment has underperformed, likely due to competitiveness concerns; businesses aren't sure whether Canada's the best place to put their money.