Canada June bankruptcies surge as job losses kick in

* Bankruptcies rise 51.6 pct yr/yr

* Business bankruptcies up 10.8 pct, personal up 54.3 pct

* Analysts see smaller increases as economy recovers

By Andrea Hopkins

TORONTO, Aug 11 (Reuters) - Canadian bankruptcies rose 51.6 percent in June compared to a year earlier as more consumers were unable to pay debts, but business bankruptcies rose only modestly despite the recession, a government report showed.

The number of consumer bankruptcies in June rose 54.3 percent to 10,823 from June 2008, while business bankruptcies rose 10.8 percent to 515, the Office of the Superintendent of Bankruptcy Canada said in a report.

"The sharp jump in consumer bankruptcies is not too surprising given we're coming off a recession, and it's probably a lagged response to the massive job losses earlier in the year," said BMO Capital Markets senior economist Sal Guatieri.

"Job losses have moderated, so we should see a slower rate of increase in consumer bankruptcies going forward," he added.

The bankruptcy report showed business bankruptcies were concentrated in manufacturing, retail, finance, real estate and accommodation and food services, while the number of bankruptcies in construction fell.

Manufacturing, especially Canada's auto factories, has been hard hit in recent months by restructuring at Detroit's Big Three auto companies and the knock-on effect of production cuts across North America.

Finance and real estate were sideswiped by the global financial meltdown, while retail and food services have seen a big drop in demand as consumers tightened purse strings.

BMO has forecast the recession will end in the third quarter and job growth will resume later this year, which Guatieri said will help reduce consumer bankruptcies. And he said the rate of business bankruptcies is actually much lower than one might have expected given the economic slump.

"I think this is the first year-to-year rate of increase in a long time, which tells us business balance sheets are still very strong -- and that's another reason to be optimistic that consumer bankruptcies will fall, because businesses are in good shape to resume hiring once economy recovers," Guatieri said.

"When you think what we've just gone through with the economy contracting about 3 percent, it's quite amazing business bankruptcies have not risen faster. I think that reflects the nature of this recession -- it's very concentrated in manufacturing and the auto industry."

Economists at TD Financial Group forecast personal bankruptcies would peak by December.

But Craig Alexander, deputy chief economist at TD, noted the average amount of debt being carried by individuals who run into financial difficulty is quite a bit higher than it was in the last economic downturn.

"In the 1990s recession, the average debt load of those declaring insolvency averaged around $24,000 ($21,800). In 2009, the average deficiency has been around $36,000," he said in a research note.

($1=$1.10 Canadian)

(Reporting by Andrea Hopkins; Editing by Frank McGurty)