The number of US businesses filing for bankruptcy is the highest in 14 years

On January 7, S&P Global Market Intelligence released data showing that the consumer discretionary sector led the number of US businesses filing for bankruptcy last year, with 108 cases. Next is industry and medical care.

In total, 694 US businesses must file for bankruptcy protection in 2024, an increase of 8% compared to the previous year and a 14-year high.

The collapse of party supplies retailer Party City is considered a typical business failure of 2024. At the end of December 2024, the company filed for bankruptcy protection for the second time in two years. Party City said it had to close 700 stores nationwide, after struggling with a “challenging business environment due to inflationary pressures on costs and consumption”.

Consumer demand fell after pandemic stimulus was gradually withdrawn. This makes it difficult for retailers of non-essential consumer goods. Some of the major bankruptcies last year included food container maker Tupperware, restaurant chain Red Lobster, Spirit Airlines and cosmetics retailer Avon Products.

“Long-term high costs put pressure on consumer demand,” said Gregory Daco – chief economist at EY. Financial Times. The financial burden is especially heavy for low-income families. However, Daco said even high- and middle-income households are spending more cautiously.

S&P Global Market Intelligence believes that the pressure on businesses and consumers will be somewhat eased when the US Federal Reserve (Fed) begins to reduce interest rates. However, at last month’s meeting, the Fed said it would reduce the pace of monetary easing this year.

In 2021 and 2022, the US will have a total of 777 bankruptcies, or an average of about 388 companies closing each year. This is also a period of low interest rates here, because the Fed needs economic stimulus during the pandemic.

By 2023, this number skyrocketed to 635 cases and continued to increase last year, when the Fed continuously raised interest rates. According to S&P 500 data, last year at least 30 businesses filed for bankruptcy protection with debts of $1 billion or more.