Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Insolvencies declined 2.7% m-o-m on a seasonally-adjusted basis (SA) in May, following a jump higher in April. While the data has been quite volatile over the past year, even on a seasonally-adjusted basis, insolvencies have been on a gradual easing trend.
The consumer insolvency rate (insolvencies per 1,000 population) edged higher in May, but remains marginally lower than it was on the eve of the pandemic. (see Fig 6). However, the level of proposals (ie renegotiation of terms) is above pre-COVID levels in all provinces, while bankruptcy levels remain well below. We also note that the total levels of insolvencies in BC, Manitoba, Saskatchewan, Alberta, and Ontario are above the levels seen in 2019; all these provinces have higher-than-average levels of debt-to-disposable income (see Fig. 7). Similarly, these provinces have seen the biggest rise in insolvency rate compared to pre-Covid.
Business insolvencies declined in May on a seasonally-adjusted basis, reversing most of the increase see in April (see Fig. 8). We also note that the business bankruptcies have been relatively stable in 2025, putting an end to the declining trend that was seen since the surge in January 2024, following the CEBA loan repayment deadline (Fig 9).
Elevated household debt, reduced purchasing power due to the recent inflationary episode, and high interest rates have put pressure on households’ finances in recent years. Nevertheless, there have been some improvements in insolvencies over the past year, likely due to declining interest rates in the second half of 2024. The labour market’s resilience is also playing a crucial role in this, allowing borrowers to weather various shocks by adjusting their lending to mitigate the impact of higher interest rates on their regular payments.
A weaker Canadian economy due to the impact of the US tariffs and the extreme uncertainty could lead to a rise in insolvencies in the coming months. Job losses is the main concern. As we have pointed to at numerous occasions, a deterioration in labour market conditions, especially job losses, and the associated decline in income would likely lead to a jump higher in insolvencies and could have some significantly negative consequences on the economy (see It’s a “Me-cession”, not a recession and Will it be a hard landing or a soft landing? The labour market will decide). Easing uncertainty, improving sentiment, and the resilience of the labour market suggest the economy is no longer deteriorating.
In Alberta, insolvencies increase in May and the consumer insolvency rate remains one of the highest amongst provinces. Albertan households have some of the highest debt-to-income ratios, making them vulnerable to rising interest rates and income losses. They have also seen a bigger decline in their purchasing power than other provinces due to underperforming wages and income gains (see Why are Albertans so grumpy? It’s about falling behind economically). This makes Albertans particularly vulnerable to job losses.
Insolvencies decreased 2.7% m-o-m in May on a seasonally-adjusted basis, following a 10.0% m-o-m increase in April. Insolvencies have been quite volatile over the past, even on a seasonally-adjusted basis. Nevertheless, insolvencies had been on an easing trend since January. Nevertheless, insolvencies, which include both bankruptcies and proposals (a renegotiation of terms), are 2.6% lower compared to the same month last year. This resulted from a 0.2% y-o-y decline in proposals while bankruptcies were lower by 9.5% y-o-y. It’s important to note that proposals represent about 78% of total insolvencies.
Compared to last year, insolvencies are mixed across provinces. Insolvencies increased the most in Newfoundland (+16.3% y-o-y), New Brunswick (+9.7% y-o-y), and BC (+6.7% y-o-y). They eased the most in Saskatchewan (-13.6% y-o-y), Quebec (-10.2% y-o-y), Manitoba (-4.7% y-o-y), and Nova Scotia (-4.3% y-o-y).
On a monthly basis, insolvencies fell by 2.7% m-o-m seasonally-adjusted (sa) in May. The details show a decrease in both bankruptcies (-8.4% m-o-m) and proposals (-0.7% m-o-m). At the provincial level, insolvencies dropped in most provinces, except in Newfoundland (+7.2% m-o-m), Alberta (+2.6% m-o-m), and BC (+0.5% m-o-m). They decreased the most in PEI (-13.0% m-o-m), Quebec (-7.9% m-o-m), Saskatchewan (-6.3% m-o-m), and Manitoba (-5.4% m-o-m).
Relative to 2019, insolvencies in Canada are currently 0.7% lower, with proposals being 30% above their 2019 levels, while bankruptcies are 45% below. We note that the level of insolvencies is higher compared to pre-COVID in BC (+32.2%), Manitoba (+16.4%), Ontario (+14.0%), Alberta (+13.4%), and Saskatchewan (+1.6%).
The level of insolvencies is still well below pre-pandemic in PEI (-33.5%), Nova Scotia (-30.1%), New Brunswick (-28.2%), Quebec (-21.0%), and Newfoundland (-19.9%).
We note that the level of proposals is well above its pre-pandemic level in most provinces, except Quebec (-0.6%). They rose, led by BC (+73.7%), Manitoba (+60.2%), Alberta (+48.1%), Ontario (+38.4%), and Sankatchewan (+33.7%).
The consumer insolvency rate (number of insolvencies per 1000 people aged 15 and over) dropped to 0.326 in May from 0.333. The insolvency rate is the highest in Newfoundland (0.459), New Brunswick (0.399), Alberta (0.391), and Nova Scotia (0.386). It is the lowest in BC (0.255), Manitoba (0.262), PEI (0.272), and Saskatchewan (0.307).
Compared to 2019, the insolvency rate is 0.048 lower nationally. It is higher than in 2019 only in BC (+0.034) and Manitoba (+0.011). It has eased the most in Nova Scotia (-0.236), New Brunswick (-0.232), PEI (-0.214) and Quebec (-0.153).
Business insolvencies lowered by 12.0% m-o-m seasonally-adjusted in May and are still significantly lower than last year (-26.2% y-o-y). The decrease in business insolvencies over the past year, representing less than 5% of total insolvencies, is due to a decline in bankruptcies (-27.6% y-o-y), and in proposals (-21.1% y-o-y). Bankruptcies represent about 75% of business insolvencies.
The decrease in business insolvencies on monthly basis at the national level, was mainly the result of lower insolvencies in Nova Scotia (-42.4% m-o-m) , Saskatchewan (-38.4% m-o-m), and BC (-33.5% m-o-m), while the decline on a y-o-y basis was mainly due to lower insolvencies in Nova Scotia (-66.7% y-o-y).
By industrial sectors, the detail shows lower insolvencies for accommodation and food services, construction, other services except public administration, transportation and warehouse, admin, support, waste management, remediation, retail trade, wholesale trade, information and cultural industries and real estate and rental and leasing. These declines were partly offset by increasing insolvencies in the agriculture, forest, fishing, hunting and professional, scientific, technology.
Compared to pre-pandemic levels, business insolvencies in Canada are 31% higher, with BC (+70%), Ontario (+49%), Alberta (+30%), Quebec (+27%) having seen the biggest increases.
In Alberta, insolvencies rose by 2.6% m-o-m sa. in May and were 1.0% lower compared to the same month last year. Over the past 12 months, there have been 19.4k insolvencies. On a seasonally-adjusted basis, the higher insolvencies in May came from an increase in proposals (+2.2% m-o-m sa) and bankruptcies (+0.1% m-o-m sa). We note that the level of proposals is currently about 48% above its pre-pandemic level, while bankruptcies are 52% below pre-COVID. On the consumer side, the insolvency rate rose to 0.391 from 0.383, slightly lower than pre-pandemic. On the business side, insolvencies are 36.4% lower than in May of last year, with a 38% y-o-y decrease in proposals and 33% y-o-y in bankruptcies.
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Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.