In October business bankruptcies shot up 7% from September, 24% more than in the same month last year. Through the first 10 months of 2009, 74,832 businesses filed for bankruptcy, a 16% increase from the same time frame last year. The hardest hit industries were real estate and retail. The October 2009 consumer bankruptcies increased by 8.9 percent from the 124,790 filings the month before.
Yesterday CIT Group, a century old small to mid capitalization business lender, filed Chapter 11. CIT had operated in 50 countries and 30 industries. Today CIT was removed from its listing on the NY Stock Exchange. Because credit has tightened, expect more bankruptcies through the coming year.
If you run your own business, be diligent about collecting on your outstanding invoices. Wait too long in pressing for payment, especially with a small business, and you could risk seeing your receivables dismissed in a bankruptcy.
Today President Obama warned that “We anticipate that we’re going to continue to see some job losses in the weeks and months to come.” There is “always a lag of several months between businesses starting to make profits again and investing again and them actually rehiring again.”
Mr. Obama added “that having moved the economy on the right track … there’s no reason why we’re not going to be able to not only create jobs, but the kind of sustainable economic growth that everybody’s looking for.” He observed that past US growth was largely driven by borrowing that can no longer be maintained today. He suggested that by turning attention to exports Americans could build a more sustainable economy.
Since the economy remains weak, many are calling for another stimulusalthough not on the scale of the $787 billion package passed last February. That bill was responsible in some estimates for up to 40% of last quarter’s 3.5% recession busting rise in the GDP. In response to the economy’s softness, today the Senate took a procedural vote that would allow the Treasury to extend the $700 Billion Troubled Asset Relief Program, TARP, to troubled banks past the end of the year. The Senate is also expected to act soon on providing up to 14 additional weeks of unemployment insurance for those hit the hardest.
Because businesses had cut inventories and expenses to the bone, one welcome piece of news shined brightly today. Manufacturing in the US rose in October to its highest level since April 2006. It was the third straight month of expansion.
Of direct relevance to home buyers is that the National Association of Realtors reported that its pending home sale index rose 6.1% in September, largely due to the first time home buyer’s tax credit. The Senate is expected to soon take up an extension and expansion of the credit, which has already passed the House.