Corporate Debt Is Not Too High
Nonfinancial corporate debt has risen to an all-time high as a share of US GDP. How much of a threat does this pose to creditors and the sustainability of the expansion? Goldman Sachs Research sees several reasons to not be too concerned.
Corporate debt remains below the 2001 peak as a share of corporate cash flows and has declined since the mid-90s as a share of corporate assets. Lower interest rates and more stable corporate cash flows have reduced the cost of debt, and the structure of corporate debt has shifted toward longer maturities. Refinancing risk has declined as corporate bond yields have become less volatile. And the corporate sector runs a financial surplus, an unusually healthy position this deep into a business cycle expansion.
