US corporate debt distress will rise

Significance

US corporate debt default and bankruptcy stress is at its most intense for more than a decade in the face of higher interest rates, elevated inflation and a slowing economy. There could be 700 corporate bankruptcies this year, the most since immediately after the 2008 global financial crisis. Defaults could double from last year.

Impacts

• Amazon accounts for 20% of the consumer discretionary sector's earnings, so its second-quarter numbers may mask broader sector distress.
• Commercial real estate companies, facing reduced demand for office space because of hybrid working, are particularly vulnerable to default.
• Corporate debt stress is not unique to the United States: USD500bn of such debt is under stress globally, 30% in the real estate sector.