KUALA LUMPUR (April 7): Small businesses across the US are experiencing a surge in bankruptcies, surpassing levels not seen since 2020.
Citing a report of a UBS note reviewed by The Epoch Times, US-based news aggregator ZeroHedge on Thursday (April 6) said that conditions could become worse as the knock-on effects from the recent banking crises begin to manifest.
The note from UBS Evidence Lab shows private bankruptcy filings in 2023 have exceeded the highest point recorded during the early stages of the Covid pandemic by a considerable amount.
The four-week moving average for private filings in late February was 73% higher than in June 2020.
UBS head of credit strategy Matthew Mish was quoted as saying that the firm believes one of the more underappreciated signs of distress in US corporate credit is already emanating from the small- and mid-size enterprises sector.
“[The] smallest of firms [are] facing the most severe pressure from rising rates, persistent inflation and slowing growth,” said Mish.
Industries hit hardest by the wave of bankruptcies include real estate, health care, chemicals, and retail outlets, according to the Swiss Bank’s report.
The Federal Reserve’s monetary tightening to combat inflationary pressures has been largely behind the uptick in bankruptcies.
UBS indicated that the fear of a credit crunch has further worsened the rise in defaults.
Credit conditions are tightening across the spectrum. Large businesses and individual borrowers are feeling the heat as well.
As of February 2023, the monthly bankruptcy filings exceeded 31,000, an 18% rise from the 25,564 bankruptcy filings reported in February 2022, according to data provided by the American Bankruptcy Institute.
The increase in Chapter 11 bankruptcies — typically used by larger businesses — rose by 83% over the same period, with 373 total filings in February of this year, the report said.