S&P Global said that the number of US companies filing for bankruptcy last month surged to the highest level in a year, indicating that companies are continuing to feel pressure from high interest rates.
The Zhitong Finance App learned that S&P Global said that the number of US companies that filed for bankruptcy last month surged to the highest level in a year, indicating that companies are continuing to feel the pressure brought about by high interest rates. According to the data, there were 66 new bankruptcy applications in April, up from 61 after an upward revision in March.
S&P Global said that since the beginning of 2024, the rate of increase in bankruptcy filings has accelerated, although the number of bankruptcy filings as of April was 210, slightly lower than 224 in the same period last year. Furthermore, so far this year, the number of companies filing for bankruptcy in the non-essential consumer goods industry is higher than in other industries.
The data also showed that among the companies that filed for bankruptcy in April, three had debts of more than 1 billion US dollars, namely clothing retailer Express, Number Holdings, parent company of discount retailer 99 Cents Only Stores, and cloud computing company ConvergeOne Holdings.
Since the inflation data used by policymakers to assess is still far above the target level of 2%, the Federal Reserve has yet to cut interest rates. S&P Global said that the failure of the Federal Reserve to cut interest rates in early 2024 may break the expectations of companies in financial distress. These companies hope to get some respite from falling borrowing costs.
According to the Chicago Mercantile Exchange (CME) FedWatch tool, the market currently expects the Federal Open Market Committee (FOMC) to cut interest rates for the first time in September. The US stock market declined in April, partly due to market fears that the Federal Reserve would signal an impending rate hike. However, Powell denied this statement after the May policy meeting.
Bankruptcy data provider Epiq AACER said last month that in the first quarter of this year, the total number of commercial bankruptcy cases under Chapter 11 of the Bankruptcy Law increased 43% year-on-year to 1,894, and March was a 20-month continuous year-on-year increase in total bankruptcy applications, personal bankruptcy applications, and commercial bankruptcy applications.
Michael Hunter, vice president of Epiq AACER, said in a statement: “The factors leading to this trend are rising capital and interest rate costs, reduced consumer discretionary spending, rising housing costs, and a continued reduction in excess savings.”