Canadian households are struggling to carry some of the biggest debt loads in the world. Office of the Superintendent of Bankruptcy (OSB) data shows consumer insolvencies just had the second-biggest August on record. The move wasn’t exactly surprising and builds on a trend that’s seen consumer insolvency filings rise to a level not seen outside of recession.
Canadian Consumer Insolvencies Had The 2nd Biggest August Ever
Canadian consumer insolvency filings for the month of August, by year.
Source: Office of the Superintendent of Bankruptcy (OSB); Better Dwelling.
Canadian consumer insolvency filings are climbing to dizzying heights. Consumers filed 11,388 insolvencies in August, an increase of 8.9% from last year. It was the second-biggest August on record, only beat by 2009’s Great Recession filings. The issue has become a trend in recent months.
Canadian Consumer Insolvency Filings Surge Ahead of Recession
Canadian consumer insolvency filings over 12-months.
Source: Office of the Superintendent of Bankruptcy (OSB); Better Dwelling.
Consumers are suddenly in a rush to seek formal debt relief. A whopping 134,466 consumer insolvencies were filed in the 12-month period ending in August. This represents a 16.0% increase when compared to the same month last year, and the biggest annualized volume since March 2020. Not a great month to match but also a commonly misunderstood comparison period.
Most people recall that March 2020 was a bad month for the global economy. As the first month of a global pandemic, it wasn’t the best environment to be a highly indebted household. However, the above data is for the 12-month period ending in March 2020, and it highlights a very different issue.
Households are under more pressure with higher rates, but they were also getting crushed back in 2019. Back then it was widely expected, and there was no shortage of global warnings about the country’s highly indebted borrowers. A stop-gap in 2020 delayed insolvencies, but didn’t necessarily fix them. The market is largely picking up where it left off, this time with more programs to carry even larger loads of debt for those who like a little risk.
Canada’s surge of consumer insolvencies is concerning, but by itself it wouldn’t be that big of an issue. However, that changes when viewed in the greater context of the economy. Economic data showing performance only seen in the worst recessions ever, is starting to accumulate. If that’s the picture when things are normal, the one expected during an actual downturn is very ominous.
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