U.S. Corporate Bankruptcies to Rise 17% in 2007 - Global Insight
U.S.
corporate bankruptcies are expected to increase by 17% in 2007, after
falling an estimated 20% in 2006, according
to Global Insight. The majority of these increases are expected to occur
in the metals, mining, and energy sectors, as well as in real estate.
The fallout from declining real estate markets will also affect areas of the financial sector, such as regional banks and mortgage-related institutions that have large exposure to the real estate markets, real estate brokers, and developers.
Within the industrial sector:
- the machine tools industry is vulnerable to slowing domestic growth and a weak domestic autos industry.
- Building materials and related chemicals industries are vulnerable to an adverse construction sector,
- the U.S. textiles industry continues to see deadly competition from foreign suppliers.
The greatest improvement in credit quality in 2007 is expected to be in the telecommunication, utilities, insurance, and healthcare sectors. Strong growth in profits and free cash flow contribute to the improvement in telecommunication services' credit quality.
The healthcare sector, in general, is also expected to fare relatively well, due in part to its defensive, non-cyclical characteristics and driven by its robust prospects for future earnings growth due to positive demographics, new technology, and pricing power.
The insurance sector will benefit from fewer natural disasters in 2006, such as hurricanes, reasonably strong asset markets, and robust demand for products. In addition, the industry's pricing power remains strong, although it has slowed from previous years.
Global Insight's Sector Risk Ratings are produced as part of our World Industry Service and are updated quarterly. More information and excerpts from Global Insight on the U.S. corporate bankruptcies forecast are at: http://www.globalinsight.com/corpbankruptcies.
