Quarterly Bulletin on Insolvency Statistics
2^nd quarter 2007

Recent Economic Developments

During the 1^st quarter of 2007, the Canadian economy experienced significant growth with the GDP increasing by an annualized 3.7% compared to 1.5% in the preceding quarter (Table 1). Final domestic demand (consumer and government expenditures on goods and services and business investment) accounts for the strong growth during the 1^st quarter and remains the driver of the Canadian economy. At the regional level, preliminary data show that Alberta (8.2%), British Columbia (5.7%), the Atlantic (5.1%) and the Manitoba/Saskatchewan (3.9%) regions posted growth above that of Canada as a whole. Meanwhile, economic growth in Ontario (3.2%) and Quebec (2.8%) was below the national level.

Employment grew at a slower pace during the 2^nd quarter of 2007. The number of new jobs in Canada increased by 54,000, which represents an annualized growth rate of 1.3% compared to a 3.9% increase in the preceding quarter. The unemployment rate remained at 6.1% for a second consecutive quarter, as did the employment rate which remained at 63.4%. Employment increased in almost every Canadian region, the exception being a 0.2% decline in the Manitoba/Saskatchewan region. Quebec (3.7%) and Alberta (2.7%) showed growth rates that were above that of the country as a whole. The employment rate continued to rise in the Atlantic region and in Quebec, while the unemployment rate decreased in these same regions. In the other 4 regions, the situation is reversed with a decline in the employment rate combined with an increase in the unemployment rate. We should note, however, that the unemployment rates in the 3 western regions are still the lowest in the country.

Consumers are still taking up debt at a faster rate than their income is increasing. During the 1^st quarter of 2007, consumer credit and mortgage credit increased by an annualized 11.3% and 10.4% respectively, which is more than the growth rate of personal disposable income (8.5%). Therefore, the debt-to-income ratio is still climbing and has reached 124.1%. Regarding interest rates, the Bank of Canada increased its overnight rate by 0.25 percentage point for the first time since May 2006. This rate hike is the result of higher-than-expected inflation. Accordingly, the different financial institutions have increased their interest rates during the 2^nd quarter of 2007. The average 5-year mortgage rate, for example, increased by 0.4 percentage point and reached 7.0%. One has to go back to the 2^nd quarter of 2002 to see a comparable 5-year mortgage rate. Despite the increase in interest rates, the debt-service ratio decreased slightly to 7.1%, the same level as in the 3^rd quarter of 2006.

Recent Evolution in the Number of Insolvencies

During the 2^nd quarter of 2007, the number of new estates filed with the OSB increased by 3.6% compared to the same quarter in 2006 (Table 2). However, it should be noted that the growth observed during the last 12 months (year ending June 30th) was -1.3%. During the last 12 months, consumer insolvencies and business insolvencies have decreased by 0.5% and 10.0%, respectively. While consumer bankruptcies declined by 3.7%, consumer proposals saw an increase of 13.5%. Meanwhile, for business insolvencies, there was a 9.5% decrease in bankruptcies and a 12.2% decrease in proposals.

Regional disparities are still noticeable with 4 out of 6 regions seeing a decrease in total insolvencies during the last 12 months. Alberta continues to be the region where insolvencies are declining at the fastest pace. During the year ending June 30th 2007, the number of insolvencies in this province decreased by 24.4%. Insolvencies have also decreased in the Manitoba/Saskatchewan region (-14.6%), British Columbia (-11.2%), and in the Atlantic (-4.6%). The volume of new estates increased by 4.7% in Ontario and by 4.0% in Quebec. Consumer insolvencies declined in 4 of the 6 regions. The largest decreases were in Alberta (-22.2%) and in the Manitoba/Saskatchewan region (-15.5%) while Ontario (5.6%) and Quebec (3.7%) were the only regions showing an increase. Business insolvencies were declining in every region with the exception of Quebec, where they increased by 7.3%. Alberta (-40.7%) and British Columbia (-28.2%) posted the most substantial decreases.

During the year ending June 30th 2007, business insolvencies were on the rise in 3 of the 16 industrial sectors (Table 3). The Management of Companies and Enterprises sector saw an 18.9% increase in insolvencies, which represents an increase of 10 estates when compared to the previous 12-month period. Among the industries where filing volumes are declining, the Mining and Gas and Oil Extraction sector (-37.0%), Arts, Entertainment and Recreation (-31.0%), and the Social Assistance and Educational Services sector (-30.4%) posted the largest decreases. During the 12-month period ending June 30th 2007, the Construction (1,311), Retail Trade (1,074), and the Accommodation and Food Services (838) sectors generated the largest number of business insolvencies filed with the OSB.