Strong growth in insolvency levels throughout last year will likely persist in 2020, according to the Canadian Association of Insolvency and Restructuring Professionals.
Latest figures from the Office of the Superintendent of Bankruptcy showed that in the year ending November 2019, a total of 135,983 Canadians plunged into insolvency. This represented an 8.9% annual increase.
CAIRP added that the OSB data is pointing to a grimmer story, considering that such trends feed upon themselves in a vicious cycle.
“The OSB stats show just the tip of the iceberg when it comes to the number of people struggling with debt in the country,” CAIRP executive board member André Bolduc stated.
“Most people wait until they have reached their breaking point before seeking help. By that point, it’s much harder to dig your way out.”
More insolvencies might also stem from an interest rate hike decision by the Bank of Canada, according to a December report by the Canadian Imperial Bank of Commerce.
“This is something that the Bank of Canada has to look at very, very closely because as a society we are much more sensitive to the risk of higher interest rates,” CIBC Capital Markets deputy chief economist and report co-author Benjamin Tal told BNN Bloomberg at the time.
“The impact of interest rates is asymmetrical: lower interest rates cannot lift you, but higher interest rates can kill you even with the unemployment rate in the basement.”
The BoC stated in its December rate decision that over the next few months, inflation might see temporary upward movements as a result of annual fluctuations in oil prices.
“Should gasoline prices remain stable, the headline inflation rate should also cool back down in the second quarter of next year, as the year-ago comparisons become a bit firmer,” CIBC economist Royce Mendes wrote in a note.