As an investor, staying informed about the current economic landscape is crucial for making strategic decisions. The recent rise in bankruptcy filings in the US is a clear indicator of the financial challenges many are facing. According to major banks, over $4.1 billion was lost last quarter due to unpaid debts. In the first half of 2024, bankruptcy filings rose by 15%, reaching 217,000.
One sector that has seen a significant uptick in bankruptcies is commercial businesses, with a 43% annual spike in Chapter 11 filings from Q1 of 2023 to 2024. Overall, commercial bankruptcies rose by 22% in Q1 of 2024, with 7,113 businesses going under compared to 5,820 in Q1 of 2023. The first half of 2024 saw 346 corporate bankruptcy filings, the highest in over a decade.
The consumer discretionary sector has been hit the hardest, with 55 bankruptcies filed by July 1, 2024. This sector includes industries such as eating out, clothing, entertainment, and travel, which are now considered luxuries as consumers prioritize essentials.
In addition, the healthcare sector has also experienced a rise in bankruptcies, with 40 companies failing. The shortage of available employees in the healthcare sector since the COVID-19 pandemic has further exacerbated the financial challenges.
The economic impact of these bankruptcies extends beyond individual businesses, as job losses are likely to follow. The public sector has seen an increase in job losses, further hurting the economy. Moreover, the closure of over 50,000 retail stores is projected before 2028, reflecting the challenges facing the retail sector.
Businesses are also grappling with supply chain issues that originated from the COVID-19 pandemic and have yet to be fully resolved. Inflation, which began with COVID-19, has been prolonged by government spending, particularly under the Biden administration. The looming threat of wars further complicates the economic outlook, with the possibility of a recession on the horizon.
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