Quarterly Bulletin on Insolvency Statistics
1^st quarter 2007

Recent Economic Developments

The Canadian economy grew by an annualized 1.4% during the 4^th quarter of 2006, a decrease compared to the 2.0% growth recorded in the 3^rd quarter (Table 1). The economic slowdown is attributable in part to a decrease in activity in the manufacturing sector. The 4^th quarter of 2006 also saw a slower growth rate of consumer expenditures, business investment, and government expenditures in goods and services, while exports grew at a slightly faster rate. At the regional level, preliminary data show that the Atlantic region and Quebec posted the strongest economic growth during the last quarter of 2006, with respective growth rates of 3.8% and 2.6% on an annual basis. Ontario, with a -0.1% growth rate, is the only region where economic activity declined.

There was solid growth in employment during the 1^st quarter of 2007, the number of jobs growing by 159,500 for Canada as a whole, which represents a 3.9% annualized growth rate. Such a performance has not been seen since the 2^nd and 3^rd quarters of 2002. The unemployment rate declined by 0.1 percentage point to a new low of 6.1% while the employment rate hit a record mark at 63.4% following a 0.4 percentage point increase from the preceding quarter. The number of jobs increased in every region. British Columbia, Alberta and the Atlantic region showed the highest growth rates with 7.7%, 6.2% and 4.1% respectively. Ontario, Manitoba/Saskatchewan and Quebec, follow with growth rates of 2.9%, 2.7% and 2.6% respectively. If the employment rate was on the rise in every region, the unemployment rate declined only in the Atlantic and in British Columbia. In the other regions, the increase in the labour force surpassed the growth in employment, explaining the increase in the unemployment rate.

Consumers are still taking up debt at a faster rate than their income is increasing. During the 4^th quarter of 2006, consumer credit and mortgage credit increased by an annualized 9.8% and 8.9% respectively, which is more than twice the growth rate of personal disposable income (4.4%). Therefore, the debt-to-income ratio is still climbing and has reached 124.6%. Regarding interest rates, the Bank of Canada left unchanged its overnight rate at 4.25%. Note that this rate has not moved since May 2006 and the consensus is that it will stay at this level throughout 2007. Accordingly, the different financial institutions have left their interest rates relatively unchanged during the 1^st quarter of 2007. The average 5-year mortgage rate, for example, remained at 6.6%, the same as in the 4^th quarter of 2006.

Despite the stability of interest rates, the debt-service ratio increased for the fifth consecutive quarter, result of the increasing debt load of consumers. Increasing by 0.1 percentage point, it reached 7.2% of personal disposable income.

Recent Evolution in the Number of Insolvencies

The 1^st quarter of 2007 showed a 1.1% decrease in the total number of new filings when compared to the same quarter in 2006 (Table 2). During this period, consumer insolvencies and business insolvencies declined by 0.4% and 9.1% respectively. If consumer bankruptcies declined by 3.8%, consumer proposals saw an increase of 14.4%. Meanwhile, for business insolvencies, there was a 7.7% decrease in bankruptcies and a 15.3% decrease in proposals.

Regional disparities are still noticeable with 4 out of 6 regions seeing a decrease in total insolvencies. Alberta continues to be the region where insolvencies are declining at the fastest pace with a 17.5% decline in the first quarter. The Manitoba/Saskatchewan region (-15.3%), British Columbia (-9.4%), and the Atlantic (-3.2%) were the other regions where insolvencies decreased. The volume of new estates did not vary in Quebec while it increased by 5.9% in Ontario. The volume of consumer insolvencies declined in 5 of the 6 regions. The largest decreases were in the Manitoba/Saskatchewan region (-15.5%) and Alberta (-15.0%). Ontario (6.8%) was the only region showing an increase in this regard. Business insolvencies were declining in every region with the exception of Quebec, where they increased by 3.0%. Alberta (-33.6%) and British Columbia (-32.7%) posted the most substantial decreases.

Showing a 28.6% increase in new filings, the Management of Companies and Enterprises sector is the only industry where insolvencies increased since the beginning of the year (Table 3). Among the industries where filing volumes are declining, the Arts, Entertainment and Recreation sector (-37.5%), the Health Care, Social Assistance and Educational Services sector (-24.5%) as well as the Information and Cultural Industries (-23.7%) posted the largest decreases. During the 1^st quarter of 2007, the Construction (380), Retail Trade (306), and the Accommodation and Food Services (237) sectors generated the largest number of commercial insolvency files.