Equifax Canada data indicates COVID-19 financial crisis is not over for consumers, small businesses
May 27 2021 - 8:50AM
Equifax Canada has released new data indicating that COVID-19 has
had a varying impact on consumers and businesses. Many are hurting
financially, whereas others have seen improvements to their
financial standing.
On average consumers have seen their credit card balances
decline during the pandemic and the lower debt levels have combined
with fewer missed payments to generally boost credit scores. For
businesses, however, decreased demand for credit presents a red
flag most notably in the last three months of 2020. Credit
inquiries dropped by over 60 per cent in the oil and gas sector,
declined by 48 per cent in construction and retail activity fell 45
per cent.
“From a business perspective, data suggests that tough times
will continue for small- to medium-sized enterprises,” said Rebecca
Oakes, Equifax Canada’s AVP Advanced Analytics. “As with consumer
credit, lower usage has led to commercial scores increasing
slightly across Canada, but this isn’t necessarily a good
thing. Businesses leverage commercial credit with suppliers as part
of their day-to-day operations and therefore lower activity can
indicate some early stress. Small businesses need to be spending
money to be making money, and right now, they’re just not
spending.”
A photo accompanying this announcement is available at
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CREDIT CARD SPENDING RETURNING TO
NORMAL LEVELSCredit card performance is generally a good
indication of consumers’ financial health. The lockdowns in early
2020 drove down credit card spending, which returned to normal
levels by the end of the year. The fact that credit card balances
have fallen indicates the impact of consumers paying off more of
their debt. The government-benefit induced surge in disposable
income has allowed 26 per cent more consumers to carry lower
revolving balances in 2021. That reversed the trend prior to COVID,
as credit card debt was growing quickly.
The clean-up in consumers’ non-mortgage debt is evident in the
overall performance with few people missing the monthly payments.
The number of people that moved from being behind on payments to
up-to-date (700k) outstripped those that started to miss payments
(600k) in 2020. That reverses the trend in 2019 when those becoming
delinquent (850k) exceeded those getting back on track (600k).
A photo accompanying this announcement is available at
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“Without question the pandemic has hurt the livelihood of many
Canadians, but this new data offers some hope that many others have
maintained if not improved their financial standing over last
year,” added Oakes. “Government funding programs touching many
corners of the economy will offer further assistance. On the credit
side, however, the numbers do suggest more of a K-shaped recovery
for younger consumers with some faring better than others.”
Missed payments and high use of revolving credit, like cards and
lines of credit, are leading drivers on a consumer’s credit score.
With these factors improving, 50 per cent of Canadians have
reported higher credit scores over the past year. That compares to
45 per cent in 2019.
The improvement in credit conditions was most evident in the
younger age groups. While they are traditionally more likely to
miss payments, they posted the most significant improvement
year-over-year. Similarly, their use of revolving credit also
posted the most significant improvement compared to the pre-COVID
period. This at least partially reflected the impact of programs
like CERB and the significant reduction in frequent credit card
transactions like gasoline, travel and restaurants.
“We expect recovery on the commercial side to remain uneven and
sector driven,” said Oakes. “We’re watching this data very closely
as small- to medium- sized businesses are incredibly important to
the Canadian economy. Low-wage workers and young people are
particularly impacted by current lockdown measures. We expect,
however, that once businesses can re-open, this sector of the
economy will rebound strongly, but the bounce back may not be
consistent for all sectors.”
Equifax Canada will continue providing insights to assess the
impact of the economic crisis while evaluating the impact of
negative occurrences on business expansion. This is done through
data and by applying a range of scores and indices to assess
current and future business trends.
About EquifaxAt Equifax (NYSE: EFX), we believe
knowledge drives progress. As a global data, analytics, and
technology company, we play an essential role in the global economy
by helping financial institutions,
companies, employers, and government agencies make
critical decisions with greater confidence. Our unique blend of
differentiated data, analytics, and cloud technology drives
insights to power decisions to move people forward. Headquartered
in Atlanta and supported by more than 11,000 employees worldwide,
Equifax operates or has investments in 24 countries in North
America, Central and South America, Europe, and the Asia Pacific
region. For more information, visit Equifax.ca
Media Contacts:Andrew FindlaterSELECT Public
Relationsafindlater@selectpr.ca (647) 444-1197
Tom CarrollEquifax CanadaMediaRelationsCanada@equifax.com (416)
227-5290
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