Rising Interest Rates, Supply Chain Woes, and Online Shopping Boom Lead to Surge in US Corporate Bankruptcies

The combination of rising interest rates, supply chain disruptions, and the ongoing surge in online shopping has proven to be a lethal blow for numerous businesses across the United States. New data from S&P Global Market Intelligence reveals that in May alone, there were 54 corporate bankruptcies, bringing the total for the year to 286. This marks the highest number of US corporate bankruptcies recorded in the first five months of the year since 2010.

Among the sectors experiencing the highest number of bankruptcies are consumer discretionary companies, which specialize in selling non-essential goods. According to S&P’s Market Intelligence data, these companies account for 37 filings so far in 2023.

Prominent names that have succumbed to the financial pressures include party goods retailer Party City and mattress seller Serta Simmons, both of which filed for restructuring protection in January. In April, Bed Bath & Beyond also filed for Chapter 11 bankruptcy protection, resulting in the closure of hundreds of stores.

The bankruptcy wave has even affected the parent company of the collapsed Silicon Valley Bank. Faced with questions about its financial stability in an environment of rising interest rates, the company experienced a fatal run on deposits, ultimately leading to its bankruptcy filing.

The Federal Reserve’s decision to raise interest rates ten times since March to temper the economy and control the rapidly escalating costs of goods and services has contributed to the current crisis. The future trajectory of the economy remains uncertain, with some experts predicting a looming recession that would intensify pressure on struggling companies, particularly those burdened with significant debt.

It is worth noting that the retail sector has been grappling with challenges long before the economic slowdown. However, despite changes in consumer shopping habits, there are indications that consumers continue to spend significantly.

While many businesses are suffering from these dire circumstances, certain professionals are poised to benefit from the rise in bankruptcies. Lawyers and investment bankers specializing in bankruptcy cases are expected to see a surge in business as companies seek their expertise during these challenging times.

As the US corporate bankruptcy count continues to rise, the impact on businesses, consumers, and the economy as a whole remains a pressing concern. The ability to navigate these turbulent waters will be crucial for companies looking to survive and thrive in this challenging environment.