The Hoyes Michalos Indicator (HMI): Consumer Proposal and Bankruptcy Predictions in Canada
Hoyes, Michalos and Associates Inc. came up with the
Hoyes Michalos Indicator (HMI) - a mathematical model used
for creating consumer proposal predictions and personal bankruptcy predictions in Canada.
For more details you can download the full report on HMI (pdf format).
Consumer Proposal Predictions
The HMI is a mathematical model created
to predict the rate of consumer proposals and bankruptcies in Canada.
The model has identified five key macro-economic factors that influence
the level of consumer filings in Canada:
- Household debt
- Personal disposable income
- Interest rates
- Cyclical changes in the economy, and
- Student loan debt
We note that:
- The rate of consumer filings has increased
from 0.63 per 1,000 adults in 1976 to 4.05 in 2003, up 674%
- Household debt per adult increased 629%
from 1976 to 2002;
- Since 1977 Visa and Master card outstanding
balances have increased at an average rate of 15.1% per year;
- Between 1975 and 2003, Personal Disposable
Income per person has increased an average of 5.9% per year (1.1%
after adjusting for inflation), as compared to an increase in
household debt per capita of 8.3% per year;
- By mid 2003, Canadians carried debt equal
to 104% of their disposable annual income, the highest level in
history; and
- Average Canada Student Loan Debt has increased
from $5,834 per student in 1990 to $9,518 per student in 2000.
Bankruptcy Predictions: Significant Increase in 2004 and 2005
The HMI predicts an increase in the number
of Consumer Filings in the range of 9% to 12% per year over the
next two years, with significant pressure on the upside. This upward
pressure on Consumer Filings over the next 12 to 24 months will
come from:
- continued growth in household credit that
will be greater than the growth in disposable income;
- expected interest rate increases over
the medium term, although they may decline in the short term;
and
- diminishing expectations regarding economic
growth, impacted largely by the Canadian dollar and interest rates.
We summarize this report with two words for Canadians in debt: "Be
Careful".
Chart assembled by Hoyes, Michalos & Associates Inc. from sources believed to be accurate;
please review the source noted above for complete results. For further information,
please contact J. Douglas Hoyes at 1-866-747-0660.
