Equifax Canada Market Pulse Quarterly Business Credit Trends Report - Q1 2023

TORONTO, June 20, 2023 (GLOBE NEWSWIRE) -- New data suggests a pattern of credit expansion and a significant shift in credit usage, indicating potential challenges for businesses according to the Equifax Canada Market Pulse Business Credit Trends Report for Q1 2023. Additionally, it highlights growing financial stress in the industrial and financial trades.

The total outstanding balance on bank-issued installment loans in Canada currently stands at $12.9 Billion, which experienced a year-over-year decline of 2.4 per cent, a first since 2019 when Equifax began monitoring this data. By contrast, during the same period, credit card balances grew by 15 per cent, while lines of credit showed an 11 per cent increase.

“The decline in installment loans and the shift towards credit card usage could be impeding their growth potential and hindering their ability to make larger investments,” said Jeff Brown, Head of Commercial Solutions at Equifax Canada.

Of particular significance in the report is the decline in loan balances, considering that installment loan balances grew by more than 35 per cent compared to 2020. This suggests that borrowers could increasingly gravitate towards credit products that don’t lock them into fixed repayment periods and offer greater flexibility in terms of interest rates. The recent hikes in interest rates by the Bank of Canada may have contributed to this shifting trend.

SLUMP IN NEW BUSINESS STARTS
In Q1 we saw a slowdown in new business openings, which is a deviation from the previous growth trajectory. For the past two years, the months of January, February, and March showed a consistent month-over-month increase in business establishments as the economy began to recover from the impacts of the pandemic. However, in 2023, there has been a noticeable dip in new business starts at the start of the year. As of the end of February, new business starts are down year-over-year by 16.5 per cent in Ontario, 14.2 per cent in B.C., 11.4 per cent in Alberta and 7.5 per cent in Quebec.

INDUSTRIAL AND FINANCIAL TRADES SHOW SIGNS OF STRESS
The industrial and financial trades are also showing signs of financial stress. “Delinquencies in industrial trades are nearing pre-pandemic levels, with late delinquencies rising by nine per cent within a 60-day window annually,” highlighted Brown. “We’re seeing this primarily in trades located in British Columbia and Alberta, suggesting that businesses operating in these regions are facing a particularly challenging economic environment.”