Trade Credit Insurer Predicts 10% Increase In Corporate Insolvencies In 2007
In a report issued last month, trade credit insurer Euler Hermes predicted that corporate insolvencies in the United States will increase by 10% in 2007. You can find details about this estimate, as well as a very interesting global economic analysis, in the full Euler Hermes global macroeconomic and insolvency outlook report.
This updated report reflects a slightly larger predicted increase in corporate bankruptcy levels from those in its report from July 2006, which I reported on in a prior post. Interestingly, while the July report predicted that corporate insolvencies would fall by 5% in the United States during 2006, this new report states that business bankruptcy filings for 2006 will end up falling by 20% over 2005 levels.
The report anticipates a "soft landing" for the U.S. economy in 2007, despite decelerating consumer spending, a sharp downturn in construction, an unemployment rate predicted to rise to 5.8%, and a growing current account deficit. The combination of these cyclical factors and the lower level of insolvencies in 2006, however, are likely to drive Chapter 11 bankruptcy levels higher in 2007.
