“We’re Going To See A Lot Of Bankruptcies”: Former Home Depot CEO Warns

Former Home Depot CEO, Bob Nardelli, is cautioning about an imminent wave of bankruptcies in the US economy. He points the finger at lawmakers for their procrastination in resolving the country’s debt ceiling issue.

I think we’re going to see a lot of bankruptcies, like Bed, Bath, and Beyond. We got Walmart not only laying people off but closing stores. We got Accenture laying people off. We got Amazon closing distribution centres. So, I think there’s a tremendous-mixed message,” Nardelli said in an April 14 interview with Fox.

The “complexity” of the American economy is “different than anything I have seen in my 52 years.”

Moreover, Nardelli criticized the lack of cooperation among Congress members to increase the US debt limit, which is adding to the challenges faced by businesses, and he expressed his concerns, stating that he is “certainly worried” about the current situation.

According to the ex-CEO of Home Depot, he has observed “inventory builds” in several public and private enterprises. He cited the period of 2007-09, when the banking crisis caused a collapse of everything, as an example.

“I think we’re in a very complex environment. And, of course, this debt issue only adds to that. It adds to the certainty of uncertainty, what’s going to happen.”

Surge in Bankruptcy Filings

In March, bankruptcy filings in all major industries across the United States increased for the third consecutive month. According to data from Epiq Bankruptcy, which provides U.S. bankruptcy court data, technology, and services, there were a total of 42,368 new bankruptcy filings last month. This figure represents a 17% rise from the 36,068 filings reported in March 2022 and is the highest monthly bankruptcy filing number since April 2021.

In addition, S&P Global Market Intelligence data indicated that there were 71 corporate bankruptcy petitions filed in March, up from 58 in the prior month. This marks the highest monthly total since July 2020 and the fourth straight month of increases.

Furthermore, S&P Global reported that the number of first-quarter corporate bankruptcy filings, at 183, exceeded “any comparable period in the past 12 years.”

Bank Lending Dips, Layoffs

During the two weeks ending March 29, lending activity by banks experienced the most significant decline ever recorded. Commercial lending in the US decreased by $105 billion during this period, which is the highest decline since 1973. This decline was mainly driven by the reduction in real estate loans, as well as industrial and commercial loans.

Financial analyst Andreas Steno Larsen predicts tough times ahead for the US economy. In an April 9th post, he stated that there is mounting evidence indicating that the banking stress fueled by SVB (Silicon Valley Bank) will result in a recession. However, instead of a rapid and liquidity-driven recession, the country may be slowly heading into a credit crunch over the summer.

The most recent Survey of Consumer Expectations (SCE) by the New York Federal Reserve revealed signs of an imminent credit crunch.

“Perceptions of credit access compared to a year ago deteriorated in March, with the share of households reporting it is harder to obtain credit than one year ago rising and reaching a series high,” according to an April 10 press release.

“Respondents were more pessimistic about future credit availability as well, with the share of households expecting it will be harder to obtain credit a year from now also rising.”

In addition to the credit crunch, there has been a significant increase in worker layoffs. According to a report by outplacement firm Challenger, Gray & Christmas, Inc., job cuts rose by 396% in the first quarter of 2023 compared to the same period last year. U.S.-based employers announced a total of 270,416 job cuts during this period, which is the highest number since 2020. Market or economic conditions were cited as the primary reason for the job cuts, followed by cost-cutting.

The collapse of SVB on March 10 led to billions of dollars being withdrawn from domestically chartered commercial banks in the country. Based on the latest figures from the Fed, deposits fell from $16,249.9 billion to $15,996.7 billion between the week ending March 8 and April 5, which is a decline of $253.2 billion.

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