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Insolvency filings in Canada were up almost 22% in February 2016 over the previous month. This compares to an increase of only 11% in the prior year. Filings were up in every major province but the most surprising result is that filings in British Columbia were up 31% over the previous month which is somewhat contradictory to the normal economic news from that province. Newfoundland was next at 24% followed by Ontario at 22%, Alberta at 21%, Quebec at 18% and Saskatchewan and Manitoba at just under 10% each. It’s not surprising that Alberta, Newfoundland and Saskatchewan all have increasing numbers of filings as those provinces are all suffering from the decline in oil and gas prices. The increase in Ontario is a bit more of a surprise given the news from that province would suggest that the economy there has been given a boost by the lower Canadian dollar, particularly in it’s manufacturing sector.
A better picture may be found by comparing the filings for the 12 months ending on February 29, 2016, with the filings for the 12 months ending on February 28, 2016. Not surprisingly, Alberta has the largest increase at 24%, followed by Newfoundland at 21%, Saskatchewan at 18%, Manitoba at 11% and Quebec at 4%. Ontario and B.C. have increases in insolvencies of less than 1%. This is much more consistent with the common economic view that the oil and gas provinces are hurting while B.C. and Ontario, the manufacturing heart of the country, are doing OK. This however, is not consistent with the month over month data referred to above.
It’s difficult to draw conclusions from this data because it is, of course, a lagging indicator. We are only just now getting the statistics for February and certainly my experience here in South Saskatchewan, is that we have been steadily getting busier since January. I have also found over the past 30 plus years that even if the economy starts turning around, insolvency filings generally increase for some considerable time as many individuals clear up the debt “hangover” they still have from having lost their previous jobs.
Given today’s weakened economy, a continuing drop in the price of oil and continued job losses, I have a feeling it’s going to get significantly worse before it gets better.
Ian Schofield is a Licensed Insolvency Trustee in our Regina office. To learn more about how MNP can help you, contact our local office at 306.790.7900.
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