New research from CIBC World Markets finds that the number of personal bankruptcies is climbing, and business failures look to be heading higher.

The report, authored by analyst Benjamin Tai, notes that, as of July 2003, personal bankruptcies rose by 11.2% on a year-over-year basis, the sixth consecutive monthly increase. The three-month moving average figure rose by 11.1% in July following a 9% increase in June and a 7% increase in May, which CIBC says is indicating a clear upward trend.

Quebec is the only province experiencing declining bankruptcies, but CIBC says that the pace of the decline in bankruptcies in the province is slowing.

As well, the number of personal bankruptcy proposals is rising, “indicating further increase in bankruptcies in the near future”. During the year ending July 2003, the number of proposals rose by 6.2%. It expects the number of personal bankruptcies to continue to rise in the near future, with the cumulative number rising by 5%-10% over the next 12 months.

“The recent upward trend in personal bankruptcies should not come as a surprise, as it reflects the recent deterioration in labour market conditions. Note the high correlation between the rate of change in unemployment in Canada and the change in the number of bankruptcies,” Tal says. “We expect labour market conditions to remain weak in the coming six months, with the unemployment rate stabilizing at around 8%.”

On the corporate side, the number of business bankruptcies was unchanged in July. And, the three-month moving average fell by 2.3% in July, following a 6.7% decline in June, and a 10.1% decline in May. “This indicates that the pace of the decline in business bankruptcies is slowing.”

“There are clear signs that business bankruptcies will start rising soon with the number of proposals for business bankruptcies rising by 6.2% in July (year-over-year, 3-month moving average),” CIBC predicts. The largest increase in the number of proposals for business bankruptcies was in Ontario and Alberta.