Corporate bankruptcies have spiked this year—a trend that seems poised to continue as rising costs eat away at consumer spending. According to S&P Global Market Intelligence, more than 450 major businesses have gone belly up so far in 2023.
That’s higher than the total number of businesses that failed in each of the previous two years. It's also the highest single-year for bankruptcy filings since 2010.
This is what it takes to cool an economy. Better bankruptcies than widespread unemployment
I wonder how long we've got until mortgage defaults start piling up again. I seem to recall we're already at absurd levels of default on consumer credit - adding corporate bankruptcy to the mix seems like we've seen another of the four horsemen.
Edit: yeah, consumer loan delinquency rates started climbing in q3 '21 - seems to be about the same time the Fed started hiking rates. Correlation doesn't imply causation and all, but I suspect the increased prime rate may have resulted in increased interest and fees in variable rate credit e.g. cards, resulting in a higher payment burden on any existing debt.
It seems to line up well with an increased slope on total household debt. Interestingly enough, Q1 this year showed that slope flattening.
We currently seem to be trending down in mortgage delinquency rates - perhaps people are taking advantage of the inflated housing prices to sell and rent in the mean time? I have no idea what would explain this as contrasted with overall interest debt and delinquency.
The vast majority of us households have mortgage rates at historical lows, rent is more expensive than many mortgages in many regions. Fewer people have adjustable rates, I don't think we'll see a significant spike in defaults in this environment.
In Australia a maybe portion of the country my self included have locked interest rates that expire this year. In Australia we expect to see delinquencies on mortgages come the start of 2024 when households are hit with new rates twice as high as they have been.
That's fair. I had only been considering the new purchases at those rates - I suppose anyone locking in a refinance at 2.5% would be spending far less than they were and similarly be less burdened.
