Quarterly Bulletin on Insolvency Statistics 1^st quarter 2005

Office of the Superintendent of Bankruptcy
April 2005

Recent economic developments

In the fourth quarter of 2004, GDP growth in Canada was 1.7% but was uneven when considering a regional perspective (Table 1). Throughout this period, GDP growth ranged from -0.4% in Quebec to 6.7% in Alberta. During the 1^st quarter of 2005, employment in Canada was up 0.6% on an annual basis. With the exception of Ontario, employment progressed for the other 5 regions. The employment rate continues to be at an unprecedented level in Canada and in 5 of the 6 regions. Ontario is the only province where the employment rate is significantly below its all-time high of 66.4% reached at the end of the 1980s. The unemployment rate fell by 0.1 percentage point to settle at 7.0%. For a second consecutive quarter, the Canadian dollar was worth over US$0.80. In the 1^st quarter of 2005, the Canadian dollar was worth on average US$0.81, a slight decrease over the preceding quarter which was its highest level recorded since the 3^rd quarter of 1992.

During the last quarter of 2004, the annual growth rate in mortgage credit (9.1%) and consumer credit (8.8%) outpaced personal disposable income growth (4.4%). The debt ratio thus continued to rise for a 15^th consecutive quarter, and reached 114.8%. This is largely due to interest rates fluctuating around their lowest level in the last 30 years. The current interest rate level also explains the low proportion of mortgages in arrears in Canada, which was 0.27% in the first quarter of 2005.

Recent increase in insolvency

These favourable economic conditions explain much of the negative growth of 3.4% in total insolvency observed in Canada since the beginning of the year (Table 2). During this period, consumer insolvency decreased by 3.0% and business insolvency fell by 7.5%. It is worth noting that proposals and bankruptcies have been on the decline since the beginning of the year and for the year ending on March 31^st 2005.

Since the beginning of the year, consumer insolvency has been on a decline in 4 of the 6 regions. The steepest drop was in Alberta (-17.8%). The only two regions that experienced positive growth are the Atlantic (8.1%) and Manitoba/Saskatchewan (2.6%). In terms of business insolvency, only the Atlantic region (14.4%) and Ontario (2.1%) saw their number of new filings increase. The biggest drop was in Quebec (-15.9%).

With regards to insolvency by industry sector (Table 3), it should be noted that only 5 out of 16 sectors posted increases in the number of new filings for the year ending on March 31^st 2005. These sectors included mining, oil and gas extraction, and utilities (25.0%), wholesale trade (4.7%), retail trade (0.9%), finance, insurance, and real estate (11.6%), and educational services, health care, and social assistance (12.6%).