Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud
After bottoming out late last year, insolvencies seem to have stabilized at a level well below those seen before the pandemic. Continued assistance to households, low interest rates and the continued economic recovery are likely weighing on insolvencies. The economic reopening over the summer and the associated broadening of the recovery should help prevent further normalization in insolvencies. However, the phasing out of many government programs in late October is likely to affect household disposable income and could lead to a rise in insolvencies.
In Alberta, a strong recovery in the oil sector, with the value of oil production reaching an all-time high in recent month, and the associated tailwind on income and confidence are likely to prevent a sharp rise in insolvencies in the province.
Insolvencies decreased slightly in September and remained well below their pre-COVID levels. Insolvencies, which include both bankruptcies and proposals (a renegotiation of terms), declined by 2.3% in September compared to the same month last year. This resulted from a 14.5% drop in bankruptcies, while proposals increased 4.3% year-over-year.
On a monthly basis, insolvencies decreased 2.9% month-over-month seasonally-adjusted (sa) in September. The lower insolvencies were led by a decline in both bankruptcies (-3.1% month-over-month sa) and in proposals (-0.1% month-over-month sa). Most provinces saw lower insolvencies on the month, with the exception of PEI, Manitoba, and Alberta, with big declines on a seasonally-adjusted basis in New Brunswick, Nova Scotia, BC, and Saskatchewan.
In Alberta, insolvencies rose 7.5% month-over-month sa and by 13.1% compared to the same month last year. Over the past 12 months, there have been 14.0k insolvencies, still well below pre-pandemic levels. The increase in insolvencies in September, on a seasonally-adjusted basis, came mainly from proposals (+9.9% month-over-month sa), while bankruptcies rose more modestly (+3.8% month-over-month sa.).
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