Euler Hermes, a trade credit insurer, predicts that corporate insolvencies in the United States will increase by 8% in 2007, after a predicted decline of 5% for the full year 2006. By contrast, 2005 saw a 14% increase, in part because companies filed bankruptcy before the new bankruptcy law took effect on October 17, 2005.
Among the economic reasons given for the anticipated increase in insolvencies next year:
- The cooling of the U.S. housing market
- High energy prices, and
- The lagging effect of the Fed’s tightening of interest rates.
The press release on the report includes an interesting graph showing the changes in the Euler Hermes Global Business Failure Index over the past dozen years. It also provides information on changes in predicted 2006 and 2007 insolvency rates for more than 30 countries and regions worldwide.
This new analysis is consistent with the results of last month’s Turnaround Management Association survey, discussed in a post earlier this week.