Analysis: Corporate Bankruptcies Are Creeping Up as Pressures in the Economy Grow

Analysis: Corporate Bankruptcies Are Creeping Up as Pressures in the Economy Grow

Corporate bankruptcies are edging back up after a two-year lull as pressures in the economy grow, a situation sure to worsen if the nation’s political leaders fail to reach a deal to prevent the government from defaulting on its debt, according to an analysis in The Washington Post. The increase is most visible among large companies, where there were 236 bankruptcy filings in the first four months of this year, more than double 2022 levels, according to S&P Global Market Intelligence. Several large recognizable companies with hundreds or thousands of workers have filed for bankruptcy protection in recent weeks, including Bed Bath & Beyond and Vice Media, although their financial troubles predated the recent economic turmoil. Among all types of companies, large and small, the increase in bankruptcies is much more muted, with filings remaining below pre-pandemic levels and historic norms, according to Mark Zandi, chief economist at Moody’s Analytics. The total numbers are still “very, very low,” he said. Yet filings are creeping up as interest rates rise, pandemic-era government support dries up and sales growth slows amid a cooling economy. Any failure to reach a deal on the debt ceiling and avoid a government default would clearly worsen the problem, Zandi said. Even a short-lived failure to pay government debts would push the economy into recession, he said. “That means businesses are going to be struggling with weaker sales. They’re probably not going to be able to get credit,” he said. “So very quickly, you will be running out of cash and having to make some pretty hard choices — layoffs, slashing investment and ultimately bankruptcy.”
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