Canada Insolvencies Climb 12.3% in May From Year Ago

By Paul Vieira

OTTAWA-Canadian insolvencies rose over 12% in May from a year ago, indicating households and businesses are struggling with higher interest rates.

The latest monthly government data say consumer insolvencies climbed 3.4% in May from the prior month, and increased 11.3% on a one-year basis. For businesses, insolvencies fell 3.8% in the month from April, but remain about 42% higher than May of 2023.

Overall, total insolvencies climbed 12.3% in May from a year ago.

"Record levels of household debt, declining purchasing power due to the recent inflationary episode, and higher interest rates are putting pressure on households' finances," said Charles St-Arnaud, economist at Alberta Central. He said labor-market resilience has helped households to weather higher rates and inflationary pressure, but a further rise in the unemployment rate could squeeze consumers further.

St-Arnaud expects insolvencies to continue the upward trajectory.

On a business-sector basis, the data indicate the highest volume of insolvencies were in construction, up 109% in May from a year ago; manufacturing, up 39.3%; and hospitality, up 4.5%.

Write to Paul Vieira at [e-mail]

(END) Dow Jones Newswires

07-02-24 1112ET