U.S. Consumer Spending Accelerates; Monthly Inflation Rates Cooling​​​

U.S. consumer spending increased in July by the most in six months as Americans bought more goods and services, but slowing monthly inflation rates cemented expectations that the Federal Reserve would keep interest rates unchanged next month, Reuters reported. The report from the Commerce Department on Thursday suggested that the economy gathered momentum early in the third quarter. Consumer spending is being supported by a tight labor market, with other data showing first-time applications for unemployment benefits unexpectedly falling last week. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.8% last month. Data for June was revised slightly higher to show spending rising 0.6% instead of 0.5% as previously reported. When adjusted for inflation, consumer spending increased 0.6%, also the largest gain since January. The so-called real consumer spending rose 0.4% in June. Last month's solid increase put spending on a higher growth path at the start of the third quarter. Declining savings and moderating wage gains could, however, slow spending in the months ahead. Spending on goods increased 0.7%, mostly reflecting products with a short life span, including pharmaceuticals, recreational items, groceries and clothing. There were also increases in outlays on recreational goods and vehicles, as well as household furnishings and equipment and other long-lasting goods. Read more.

Weekly U.S. Applications for Jobless Claims Inch Back Down in Latest Report​​​

U.S. applications for unemployment benefits fell slightly last week as companies held on to employees in an economy that has largely withstood rapidly rising interest rates, intended to cool hiring and spending, for more than a year, the Associated Press reported. The number of Americans applying for jobless benefits fell by 4,000 to 228,000 for the week ending August 26, the Labor Department reported Thursday. The four-week moving average of claims, which evens out some of the weekly volatility, rose by 250 to 237,500. Overall, 1.73 million people were collecting unemployment benefits the week that ended August 19, about 28,000 more than the previous week. Read more.

Next Friday: ABI Subchapter V Task Force Virtual Public Hearing to Examine Confirmation Issues​​​

The fifth virtual public hearing of ABI's Subchapter V Task Force will take place on Sept. 8 at 3 p.m. EDT, and will feature witness testimony from bankruptcy judges and practitioners who will share their perspectives on confirmation issues. Click here to register.

Looking to catch up on previous hearings? Access them here!
 

Climate Change Raising Risks of Financial Disaster for Homeowners, Insurers and Bankers​​​

The rising weather-related risks from climate change, from coastal hurricanes to western wildfires, are increasingly pinching insurance companies, which are raising rates and pulling back from parts of the country in an effort to stay in business, The Hill reported. Just this summer, two major insurance companies left Florida, adding to the long list of companies that have left the state. In July, Farmers Insurance announced it would no longer write policies in the state; in August, United Property and Casualty went bankrupt, leaving 22,000 Floridians high and dry and all Florida residents having to foot the bill to bail it out. The hurricane that cut across Florida this week is just the latest in a string of billion-plus-dollar disasters to hit the U.S. this year. As of early August — before the fires that leveled Lahaina in Hawaii, and before hurricanes Hilary and Idalia — the U.S. had experienced 15 climate disasters with losses exceeding $1 billion, according to federal data. Those disasters are becoming more frequent. In the 1980s, an average of almost three months separated such large-scale disasters — but for the last five years, they’ve been coming about every three weeks. The backstop to these losses is the insurance industry, which has seen its costs increase exponentially in recent years. In 2021, the industry as a whole paid out nearly $4 billion more than it took in — and in 2022, following Hurricane Ian, those losses ballooned more than six times to nearly $27 billion, according to a review by a leading insurance trade group. Read more.

Fitch: Liquidity, Refi Risk Were Key U.S. Loan Default Drivers in August​​​

Liquidity constraints, combined with high near-term debt maturities and idiosyncratic challenges such as opioid litigation, remain a key pressure point leading leveraged finance issuers on Fitch Ratings's "Top Market Concern Loan" list to file for bankruptcy and/or undertake distressed debt exchanges (DDEs), according to a press release. They are also contributing factors behind many of this month’s new additions to the Top Market Concern list, which Fitch said rose by $8.5 billion on a gross basis in August 2023. Fitch expects loan defaults to rise over the remainder of 2023, ending the year within a range of 4.0%-4.5% due to refinancing challenges, constrained liquidity, tighter lending conditions and the high cost of debt. Fitch's 2024 leveraged loan default rate forecast is 3.50%-4.50%. Read more.

Wall Street Prepares for $15 Billion Spree of Risky Buyout Debt​​​

A $15.4 billion wave of debt is set to sweep over leveraged finance markets in September as Wall Street banks rush to lure in yield-hungry investors, Bloomberg News reported. Bankers are expected to kick off a series of new junk bonds and loans tied to M&A after the Labor Day holiday in the U.S. While the forward calendar pales in comparison to 2019 — which had a roughly $60 billion pipeline in August, according to PitchBook LCD — it’s a welcome development in a market that’s seen little buyout financing so far this year. Deals expected to launch in September include about $8.4 billion of syndicated debt for GTCR’s purchase of a majority stake in Worldpay Inc. About $3.7 billion of debt for the buyout of Syneos Health, a roughly $1 billion loan for the buyout of publisher Simon & Schuster Inc. and nearly $1.7 billion in debt for the acquisition of packaging firm Veritiv Corp. are also in the pipeline. Banks have been committing to financing for a slew of new deals, repopulating thin debt pipelines even as Federal Reserve officials vow to fight inflation by keeping borrowing costs elevated. Read more.

Analysis: Rents Have Peaked, but Construction Challenges Down the Road Loom Large​​​

For the third consecutive month, asking rent prices — or vacant units advertised by landlords — have fallen, declining 1% over the same period a year ago, according to Realtor.com’s July rental report, YahooFinance.com reported. "We're at the point in the season where we typically see rents decline," said Danielle Hale, Realtor.com chief economist. "And rents are down from a year ago as they have been for the past few months and so that means we are likely to see that 2022 was the peak for rents. And we're starting to see some decline." The big reason for the slowdown: more housing. In the past three years, builders have added 1.2 million apartments to the market, with 2023 shaping up to be a peak year as developers expect to open 460,860 rentals by year-end, according to RentCafe's construction report. But new financing challenges are emerging that could threaten the supply — and rental price — outlook beyond next year. Already, West Coast metro areas are facing an apartment construction slump. Data from CoStar Group shows that developers are on pace to build less than 32,000 apartments in Los Angeles, San Francisco, San Diego, San Jose, Seattle and Portland this year — marking a roughly 20% drop compared with 2021 levels. Read more.

Submission Period Extended to September 8 for ABI’s International Matter of the Year Award​​​

ABI’s International Committee has extended the submission deadline to Sept. 8 for its Second Annual ABI International Matter of the Year Award. For criteria, eligibility and other submission information on the award, please click here. All submissions are now due by Sept. 8.
 

Public Notice for Reappointment of Bankruptcy Judge Mildred Cabán​​​

The current term of office of Hon. Mildred Cabán, U.S. Bankruptcy Judge for the District of Puerto Rico, is due to expire on March 16, 2024. The U.S. Court of Appeals for the First Circuit is considering reappointment of Judge Cabán to a new term of office and has determined that she appears to merit reappointment subject to public notice and opportunity for public comment. Members of the bar and the public are invited to submit comments for consideration by the court of appeals regarding the reappointment of Bankruptcy Judge Cabán to a new term of office. All comments will be kept confidential and may be submitted via U.S. Mail to Susan J. Goldberg, Circuit Executive, John Joseph Moakley United States Courthouse, 1 Courthouse Way, Suite 3700, Boston, Massachusetts 02210, or in the form of a PDF letter attached to an email to Susan_Goldberg@ca1.uscourts.gov. The circuit executive will then submit the comments to the court of appeals for its decision. Comments must be received no later than Friday, September 8, 2023. 

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!