High numbers of company insolvencies and liquidations point to extremely harsh trading conditions in construction, hospitality and retail, an expert says.
Data from credit bureau Centrix shows insolvencies jumped to 269 in May - up by more than 100 from the same month last year.
Company liquidations are up 22 per cent year-on-year and are the highest level recorded in May for a decade.
Centrix managing director Keith McLaughlin says the cost-of-living crisis is enduring.
“When consumers are facing difficult circumstances they very quickly stop discretionary spending,” Keith McLaughlin says.
“By stopping their spending, things like retail, hospitality, building, construction, even new motor vehicles get put off or cancelled.
“That puts a lot of pressure on the business sector.”
South Island liquidations are up significantly year-on-year.
Over the first quarter, there were 94 company liquidations in the South Island, up 47 per cent on a year ago. That figure is largely driven by the Canterbury region.
There were 259 liquidations in Auckland over the same period, up 38 per cent year-on-year, and 137 liquidations across the rest of the North Island.
Credit pain
The number of people falling behind on their mortgage and credit card payments increased, as arrears tracked 8.2 percent higher year-on-year.
Centrix data shows 474,000 people were behind on their payments in May, amounting to 12.64 per cent of the credit active population.
That trumps the figure for April of 458,000.
“You see people starting to miss the first payment, that flows to 30 days, 60 days, 90 days and then serious default. We are starting to see that movement through the arrears programme,” says McLaughlin.
More than 170,000 consumers were 30-plus days past due, and 114,000 were 60-plus days in arrears.
On the other hand, the proportion of households behind on energy payments had slightly decreased.
And according to the data, financial hardships increased sharply by 25 per cent on May 2023 to 13,000, with nearly half of those due to mortgage repayment difficulties.
The demand for credit continues to subside and non-mortgage lending is down year-on-year for the May quarter.
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