Bankruptcy filings in the United States reached a 14-year high last year due to tighter credit conditions, rising interest rates, and reduced consumer spending.
Key Facts:
• At least 694 U.S. companies filed for bankruptcy in 2024, the highest since 2010.
• The previous high was 639 in 2020, when the COVID-19 crisis caused a severe economic downturn.
• Consumer discretionary and industrials sectors were hit hardest, accounting for 28 percent of bankruptcies.
• The Federal Reserve lowered rates slightly in late 2024 but signaled caution amid persistent inflation.
The Rest of The Story:
According to data from S&P Global Market Intelligence, total debt among U.S. nonfinancial corporations rose to a record $8.453 trillion in 2024.
Many companies struggled to refinance as interest rates climbed and consumer demand softened.
Meanwhile, manufacturers dealt with weaker factory output, compounding the financial distress.
Economists note that inflationary pressures remain a concern.
The Federal Reserve shifted its inflation outlook in December 2024, projecting fewer rate cuts than initially expected.
Chair Jerome Powell emphasized that taming inflation is a top priority and left the door open to further rate hikes if warranted by new data.
Corporate Bankruptcies rise to highest level since the aftermath of the Global Financial Crisis 🚨 Probably Fine pic.twitter.com/M5n0t6c9Am
— Barchart (@Barchart) January 8, 2025
Commentary:
In our opinion most of these corporate bankruptcies were primarily caused by Bidenomics and it’s resultant inflation.
Policies under the current administration, along with inflation, have boosted operating costs and squeezed profit margins in sectors sensitive to consumer spending and raw material prices.
Many hold that the incoming Trump administration’s approach could lower inflation and calm credit markets, giving businesses room to recover.
⚠️US CONSUMER DISCRETIONARY SECTOR BANKRUPTCIES ARE SKYROCKETING⚠️
There have been 99 large consumer discretionary firms that went bankrupt year-to-date.
It has been driven by an average consumer pulling back on spending due to record prices in the US👇https://t.co/4ufXQXjIrC
— Global Markets Investor (@GlobalMktObserv) January 5, 2025
The Bottom Line:
The steep rise in corporate bankruptcies signals ongoing challenges for U.S. firms.
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Looking ahead, many are hopeful that the incoming Trump administration will implement policies that help guide businesses toward a stronger recovery.