Bankruptcy Expert Worries about Double-Dip Recession
ST. LOUIS–(KMOX)–Faced with some of the best news in over three years about the economy, Mark Hoffman still worries about a double dip recession.
Hoffman, a partner with the CPA firm Hoffman Clark, announcing business bankruptcy filings for the first quarter of the year in the St. Louis area are the lowest they’ve been since 2007.
There were 52 companies that went belly up — a drop of 40 percent compared to the previous quarter, and a decrease of 43 percent from a year ago.
So, what’s there to worry about?
Plenty, says Hoffman.
“I worry about the gasoline prices,” Hoffman said, “because usually what happens after a spike in gasoline prices is a recession follows.”
Hoffman points to recent history — in 2008, when oil rose to $125 a barrel just before the recession started.
But also, he’s hearing it from business clients, stories about tight margins and rising costs.
“Right now, businesses are very worried about prices,” Hoffman said, “Their margins are being squeezed, because in this economy business activity is getting better, but it’s difficult to increase prices.”
Looking back on the recession he hopes is over, Hoffman says over 1,200 St. Louis area businesses filed for bankruptcy since the fourth quarter of 2007. Most of them, he says, were real estate or construction related. Others washed down the gulley included many restaurants and retail stores.
As the recovery takes hold, the St. Louis area has posted its second consecutive quarter of declining business bankruptcies.
But Hoffman says we’re not there yet. He compares the St. Louis economy to “an engine firing on three of its four cylinders.”
“One is businesses are rebuilding their inventories,” Hoffman said, “Consumers are spending more. And just recently the unemployment rate is going down.”
So, what’s “not firing?”
“The fourth cylinder that’s not firing is housing prices,” Hoffman said, ” Housing prices have remained down. They’ve dropped and they’ve stayed down. And some are fearful that could mean a double dip recession.”
Hoffman shrugged and with a hopeful air added that if employment picks up, then “we should be all right.”