U.S. companies are starting to accumulate debt again.
Total marketable debt (bonds + loans of all types) of leading U.S. non-financial companies rose to $7.6 trillion as of Q1 2024, up from $7 trillion in Q4 2022, according to proprietary calculations based on companies' public filings.
Analysis of Debt Stabilization
From Q2 2020 to Q4 2022, debt remained roughly flat in the $6.8 - $7 trillion range. During Q2 2020 to Q4 2021, businesses were "digesting" subsidized loans under various anti-COVID programs (minimum rates with virtually no collateral), and there was no necessary demand for debt in 2022 (the reduction in bond debt was offset by comparable loan growth).
To be fair, even though debt has grown significantly in absolute terms (about $0.6 trillion over 5 quarters), the annualized growth rate is less than 6%, whereas debt grew at rates of 10% and 9% from 2011 to 2019.
Debt Growth Rates and Sectoral Contributions
Debt has grown in all sectors except transportation and communications over the past year, and the technology sector has been the largest contributor to debt growth - accounting for 1/3 of the total debt growth of all non-financial companies.
Total debt stands at $7.6 trillion, with almost $2 trillion in cash, resulting in a net debt of $5.6 trillion. The example of the technology sector is very telling: it went from negative net debt of $200 billion 10 years ago to net debt of almost $0.4 trillion by Q1 2024, i.e., a net accumulation of about $0.6 trillion in 10 years. This is comparable to commodities and utilities and slightly lower than the consumer sector.
The tech sector has become a major debt sink with significant growth after 2021 - almost +$300 billion, more than all others.
Conclusion
In conclusion, U.S. companies are once again accumulating debt: total market debt of leading nonfinancial companies will rise to $7.6 trillion by Q1 2024, up from $7 trillion in Q4 2022. This is a significant increase after a period of stability from Q2 2020 to Q4 2022 when debt remained in the $6.8 - 7 trillion range as companies managed subsidized loans under crisis programs. Despite an absolute increase in debt of $0.6 trillion over the five quarters, the annualized growth rate of less than 6% is relatively modest compared to the 10% and 9% growth rates seen from 2011 through 2019. Notably, the technology sector was the largest contributor to debt growth, accounting for one-third of the total increase: its net debt increased from negative $200 billion 10 years ago to nearly $0.4 trillion by Q1 2024. This significant shift underscores the role of the technology sector as a major debt sink, with growth outpacing all other sectors from 2021 onwards.