Canada’s financial analysts are worried about the surge in the number of people who can’t pay their debts.
Some 11,935 consumers filed for insolvency in September, according to the Office of the Superintendent of Bankruptcy — a 19 percent increase from a year earlier and the biggest annual gain since 2009. So far in 2019, there have been 102,023 consumer insolvencies, the second-most for the first nine months of a year in records dating back to 1987.
While the increases are coming from low levels, the trend is a worrying development that suggests Canada’s households are increasingly creeping into debt, at least for the most extended individuals. But it’s a bit of a puzzle, given the economic backdrop has been positive, including an unemployment rate that’s dropped to historically low levels.
“Normally there’s a story you can tell, like there’s some underlying weakness that shows up with a bit of a lag in personal bankruptcies and insolvencies,” said Stephen Gordon, an economics professor at Université Laval in Quebec City. “It’s just hard to see that now. It’s perplexing.”
Insolvencies are accelerating at a pace that’s been associated with periods of recession and financial crises.
The significance of the latest data is open to debate. For one thing, the insolvency numbers are at odds with other indicators that show a more benign environment for household debt. For instance, mortgage arrears were 0.23 per cent nationally at the end of July, close to the lowest they’ve ever been, and delinquency rates on non-mortgage debt remain subdued.