Insolvency was up sharply a month before the holiday season, on the eve of a recession which, however, should be small. Going forward, the strength of the job market remains key.
According to data from the Office of the Superintendent of Bankruptcy published in early January, the total number of insolvency files in Quebec increased by 4.6% between October and November. The increase compared to November 2021 reaches a rate of 13%, with an increase of 11.7% in consumer cases and 31.4% on the business side, with consumers accounting for 92% of cases filed.
For the 12-month period ending November 30, the increase in the number of insolvency files was 8.1% compared to the corresponding period ending November 30, 2021, of which 6.8% for those concerning consumers and 28.6% on the business side. Interestingly, if we still compare the two 12-month periods, the number of consumer bankruptcies fell by 13.4%, while proposals increased by 22.2%. For businesses, both options are up, by 29% and 26% respectively. But we are talking about 25,434 consumer files against 1,926 business files.
At the Canadian level, where the number of consumer insolvency filings increased by 9.5% between the two 12-month periods, the proportion of insolvent consumers who opted for a proposal to creditors increased to 75% , compared to 69%.
Sharp rise in the cost of living, strong rise in interest rates and erosion of purchasing power… Gathered in a round table organized by The Economic Club of Canada, the economists of the major banks sketched out a scenario of a slight slowdown this year, indicates a text from The Canadian Press. The rhetoric oscillated between a “soft landing”, a mild recession and a reopening of the Chinese economy dealing a heavy blow, with inflationary pressures lingering and interest rates still high.
On the American side, JPMorgan Chase now considers that a “moderate recession” from the fourth quarter is the most likely scenario, while Citigroup and Bank of America have mentioned a “deterioration” in the outlook, and Wells Fargo, an economic environment “less favorable,” reads a text from Agence France-Presse.
On inflation, Royal Bank Chief Economist Craig Wright expects earlier felt monetary austerity to do its job and bring inflation back into the Bank of Canada’s target range by the end of the year.
As for the labor market, TD Bank chief economist Beata Caranci predicts some 100,000 job losses this year, which would be well below the 300,000 losses that would normally occur in a recession, he says. . Oxford Economics has already put the figure at 200,000. Factor in the fact that the number of vacancies in the Canadian economy stood at 991,680 in the third quarter of 2022, for a historically high rate of 5 .6%. The number was 246,230 in Quebec, for a rate of 6.1%.
Francis Généreux, senior economist at Desjardins Group, talks about a year of disinflation at most. But, “yes, the international factors that caused commodity prices to rise are now reversing. To achieve the same result on the services side, it will necessarily require a slowdown in both demand and the labor market, including a slower increase in wages”.