Delinquency and Failure Rates
Delinquency peaked in Canada for Q3 of 2010 due to the global economic events and disasters (including the US debt downgrading, Wall Street Reform, BP oil spill, Japanese tsunami) impacting the Canadian economy. Other notable events for our Canadian Economic Trends Analysis were income trust tax, Lehman Brothers, GM and Chrysler filing for bankruptcy.
The global economic events and disasters mentioned in the previous section had a delayed impact on the Failure Rate, with the peak occurring in Q3 of 2011, which is a full year after the peak of the delinquency rate. Conversely, a more immediate spike was experienced in Q3 of 2013, after the escalation of the senate crisis
Commercial Credit Score (CCS) and Financial Stress Score (FSS) vs. Delinquency
The Canadian D&B Commercial Credit Score predicts the likelihood that a company will pay its bills in a severely delinquent manner (90+ days past term), or that it will seek legal relief from creditors, or cease operations without paying all creditors in full over the next 12 months (based on the information in D&B’s files). Severe delinquency describes a company with greater than or equal 10% of total payments being 91+ days slow, and with prompt payments bring less than 90% of total payments.
The Canadian D&B Financial Stress Score predicts the likelihood that a business will seek legal relief from its creditors, cease business operations without paying all its creditors in full, voluntarily withdraw from business operations and leave unpaid obligations, go into receivership or reorganization, or make an arrangement for the benefit of creditors over the next 12 month period, based on the information in D&B’s files.
The following charts show the relationship between the CCS/FSS, and the delinquency rate in Canada over the past five years.
The delinquency rate peaked at 35.9% in Q1 of 2011, which is two quarters after the US debt downgrade by S&P. This coincided with a decrease in the CCS – a trend that continued until Q3 in 2013.
The failure rate of Canadian businesses peaked at 0.69% in Q4 of 2013. This is two quarters after the US Debt & Senate Crisis and bail-out plan extension announcement.
Agriculture, Fisheries and Forestry Industry Statistics
For the Fall 2014 quarter, we are featuring statistics for the agriculture, fisheries and forestry industries in Canada.
Over a 4-year period from Q1 in 2009 to Q4 in 2013, Dun & Bradstreet has seen large swings in the number of businesses in this industry. The temporary but significant decrease in active businesses can partially be attributed to CRA subsidies to farmers for producing fossil fuels (using maize). After the CRA subsidies were announced in 2009, farms that were operating as multi-parcel land farms quickly consolidated to form mega-farms in order to take advantage of these subsidies. As a result, the number of farms remained low until Q4 in 2012, when the subsidy was lifted. After this change, the farms reverted to individual parcel farms leading to a gradual increase in the number of businesses in this sector.
The delinquency rate in this industry peaked at 28.3% in Q4 of 2010, which was impacted by the CRA subsidy for fossil fuel production.
The failure rate in this industry peaked at 0.21% in Q1 of 2011, again, impacted by the CRA subsidy for fossil fuel.