Recession Looms as Small Businesses Are Filing for Bankruptcy at a Record Pace
Small businesses in the United States are filing for bankruptcy at a rate not seen since 2020.
The four-week moving average for private filings in late February was 73% higher than in June 2020, according to the note from UBS Evidence Lab, which shows private bankruptcy filings in 2023 have exceeded the highest point recorded during the early stages of the Covid pandemic by a considerable amount.
One of the more underappreciated signs of distress in US corporate credit is already emanating from the small- and mid-size enterprise sector, says UBS head of credit strategy Matthew Mish.
[The] smallest of firms [are] facing the most severe pressure from rising rates, persistent inflation, and slowing growth," said Mish.
Bankruptcy hot spots right now include the real estate industry, which has led to this year's increase in filings, but the healthcare sector could follow suit as credit stress seeps into the labor market, according to UBS.
The Federal Reserve's monetary tightening to combat inflationary pressures is largely responsible for the increase in bankruptcies.
The fear of a credit crunch has exacerbated the rise in defaults. Larger businesses are not bulletproof, according to UBS.
Credit conditions are tightening across the spectrum. Large businesses and individual borrowers are feeling the heat as well.
As of February 2023, the monthly bankruptcy filings exceeded 31,000, an 18% year-over-year rise from the 25,564 bankruptcy filings reported last year, according to data provided by the American Bankruptcy Institute. The increase in Chapter 11 bankruptcies — typically used by larger businesses — rose by 83% over the same period, with 373 total filings in February of this year, the report said.
Source: UBS, Business Insider
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73234112 : That’s real bad
1688 Kueh : the sky is falling down.
104028267 : does it mean stocks will depreciate? sell?
theoj : Because of Fed
Rockaphobic : Cloudy, with a side of inflation. I'll take one bankruptcy to go, please and thank you.
TurkTrades Rockaphobic : with grammar and manners like that, you'll never go bankrupt .
PepePumper : Thanks Biden
Lemon1997 104028267 : not really, it depends on which stocks the large investor invest in
搞经济 抄底 加仓 : They're lucky. Most businesses filed/Closed 1th Quarter 2022.
Charleshsg : So sad to hear this… who stocks will fall due to recession?