A surge in commercial bankruptcies is gaining speed in Canada and the U.S., a sign that tightening credit and rate hikes are starting to weigh on big business.
In the year up to the end of July, more than 400 U.S. corporations filed for bankruptcy – more than the total for all of 2022, S&P Global Market Intelligence reported earlier this month.in the second quarter compared with the prior year, according to the Office of the Superintendent of Bankruptcy. When central banks jacked policy rates to levels not seen in more than 20 years, one may have reasonably expected the corporate sector to suffer mightily. That didn’t happen. Instead, earnings went up, business failures stayed low and credit issues were minimal.
This may have extended the traditional cycle that sees higher rates and tightening lending standards translate to heavy corporate defaults, said James Hodgins, an analyst at Stifel Nicolaus Canada. But only temporarily.