Editorial: Fast-tracking recession worries

Canadian business will be relieved that Canadian National Railway (CN) trains started running again last week, but they should be less upbeat that a lot of multi-car economic trains are starting to run off the rails in the wider world.

Take credit and debt, for example.

Runaway trains in those areas are beginning to raise red flags in business communities here and abroad.

Horrible. That’s how Credit Benchmark characterizes the data in its most recent Credit Consensus Indicator (CCI) credit opinion index.

The global financial analytics firm uses bank-sourced data to access business credit risk levels that in turn provide a measurement of how analysts view credit risks related to companies in key industrial sectors.

CCI numbers in all three major regions analyzed – the United States, the European Union and the United Kingdom – qualify for Credit Benchmark’s “horrible” rating. Simply put, the data points to credit problems ahead for industrial companies in the three regions. That could likewise be horrible for other sectors there and elsewhere.

It also bodes ill for consumers and private citizens during a time when the Organization for Economic Co-operation and Development and other organizations are issuing warnings of low growth ahead for the global economy as escalating trade tensions and protectionism increase business and investor uncertainty.

Add in the growing debt burden for governments and the alarming accumulation of personal debt in Canada and other countries and you have a formula for an extremely painful economic correction.

As Canada’s Office of the Superintendent of Bankruptcy noted in a November 12 release, the slowing Canadian economy has resulted in the first year-to year increase in business insolvencies in almost two decades.

Fortunately the idled CN trains that provide the main arteries for North America’s economic lifeblood are back on track, but the upwardly spiralling debt and credit erosion on a host of fronts still represents the prospect of a serious train wreck ahead for Canada’s economy.