Canadian businesses are showing early signs of distress under the turmoil
has thrust on the economy.
Equifax Canada’s
out today shows delinquencies are rising for businesses across the country, with the rate in some sectors reaching levels not seen since the financial crisis in 2009.
More than 309,000 businesses, or 11 per cent of credit active businesses in Canada, missed at least one payment in the first quarter, an almost 15 per cent increase from the year before, said Equifax.
Some sectors are showing more strain than others, particularly those dependent on consumer spending. The delinquency rate for accommodation and food services rose to almost 17 per cent.
“This seems to be a classic ripple effect,” said Jeff Brown,
head of commercial solutions. “Equifax data suggests when households pull back, restaurants, retailers and local service providers feel it first — and hardest. This can then travel up the supply chain, where everyone from manufacturers to transport companies feels its effects.”
A
earlier report by the credit reporting agency
last month found that more than 1.4 million consumers missed at least one payment during the quarter.
Another sign of trouble is lower credit demand. Businesses applying for new credit in the first quarter dropped 6 per cent from the year before, which Equifax said suggests growing caution.
Businesses are also tending to pay their suppliers first and their bank or financial institutions last. Growth in delinquency rates on loans and lines of credit were higher than on money owed to suppliers.
“Businesses are paying suppliers, but with little to spare, they may be missing banking obligation payments. This may signal that businesses are strategically recalibrating, with many businesses prioritizing supplier relationships to keep operations moving,” said Brown.
Delinquency rates are up nationally but some provinces and industries “are flashing red,” the report said.
Ontario and British Columbia had the highest financial trade arrears, up almost 19 per cent and 20 per cent, respectively.
But Quebec and Prince Edward Island showed a spike in industrial trade delinquencies, up 26.6 per cent and 15.9 per cent, respectively, suggesting stress in the credit relationships with suppliers.
Several sectors too showed higher increases in missed payments than the national average. Agriculture’s delinquency rate rose by almost 20 per cent, transportation & warehousing was up 19 per cent and real estate up 17 per cent.
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Prime Minister Mark Carney
vowed to boost defence spending
yesterday so that Canada meets its NATO target this year, five years ahead of schedule.
Canada, which last year spent just 1.4 per cent of gross domestic product on defence, has lagged NATO’s 2 per cent target and most other NATO members, as today’s chart shows.
Carney had promised during his campaign to meet the target by 2030 or earlier.
The government’s pledge, however, may still prove too little, too late.
Monday’s announcement came just ahead of a major NATO meeting in the Netherlands later this month in which allied nations are expected to adopt a plan to hike the spending target to five per cent of GDP — a level Canada has not reached since the 1950s.
- The Global Energy Show starts today in Calgary today with people from 100 countries expected to attend. The head of OPEC will deliver the keynote address at the conference which will also feature chief executives from major Canadian and international energy companies and several political leaders, including Alberta Premier Danielle Smith.
- Today’s Data: United States NFIB small business optimism
- Earnings: JM Smucker Co.
- Who is the typical first-time home buyer in Canada and how much money do they need?
- Here’s why the Bank of Canada is rolling the economic dice if it stays on sidelines any longer
- Why it’s a ‘smart’ time to buy a home
Canadians have a huge share of their wealth wrapped up in real estate and many hope their property will help fund their retirement. But financial adviser Jason Heath warns homeowners banking on a turnaround in home prices to be cautious. If you are valuing your home today based on the 2022 peak that was 10 per cent or 20 per cent higher, your retirement plan may not be realistic, he writes.
McLister on mortgages
Want to learn more about mortgages? Mortgage strategist Robert McLister’s
can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his
for Canada’s lowest national mortgage rates, updated daily.
Financial Post on YouTube
Visit the Financial Post’s
for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.
Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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