Fed: Sharp economic decline in May leaves businesses ‘pessimistic’ about recovery
Economic activity “sharply” declined across the U.S. through May, leaving businesses “highly uncertain” about their futures and “pessimistic about the potential pace of recovery,” according to a Federal Reserve report released Wednesday.
The Fed’s May “Beige Book” — a monthly compilation of business activity reports from each of the system’s 12 districts — painted a dire picture of the economic toll of the coronavirus pandemic as states began to gradually lift restrictions imposed to slow the spread of COVID-19.
The Fed reported a deep, nationwide plunge in consumer spending, manufacturing activity, travel and construction due to disruptions driven by the pandemic, sending shockwaves through the energy, real estate, auto, aerospace and agricultural industries.
While banks reported strong demand for emergency Small Business Administration (SBA) loans, a sharp drop in residential home sales and evaporating revenue from missed commercial real estate rent payments pose other threats to the financial sector.
Big Bankruptcies Sweep the U.S. in Fastest Pace Since May 2009
(Bloomberg) — In the first few weeks of the pandemic, it was just a trickle: companies like Alaskan airline Ravn Air pushed into bankruptcy as travel came to a halt and markets collapsed. But the financial distress wrought by the shutdowns only deepened, producing what is now a wave of insolvencies washing through America’s corporations.
In May alone, some 27 companies reporting at least $50 million in liabilities sought court protection from creditors — the highest number since the Great Recession. They range from well-known U.S. mainstays such as J.C. Penney Co. and J. Crew Group Inc. to air carriers Latam Airlines Group SA and Avianca Holdings, their business decimated as travelers stayed put.
In May 2009, 29 major companies filed for bankruptcy, according to data compiled by Bloomberg. And year-to-date, there have been 98 bankruptcies filed by companies with at least $50 million in liabilities — also the highest since 2009, when 142 companies filed in the first four months.
Few people believe bankruptcies have by any means hit a peak.
“I think we’re going to continue to see filings of at least the level we’re seeing for a while,”said Melanie Cyganowski, a former bankruptcy judge now with the Otterbourg law firm.
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