Experian's Kyle Matthies provides a roundup of international credit report usage statistics showing which regions are surging or declining.

As of recent years, women-owned businesses in the United States have experienced significant growth and have become a substantial force in the economy. It is estimated that there are more than fourteen million women owned business generating over two trillion dollars in annual revenue. The growth in women owned businesses has been fueled by a myriad of reasons, is occurring across all age groups and serves a diverse number of industries. Even with the growth in the number of women owned businesses and the economic impact these business have, women owned businesses are still underserved in the commercial credit markets. Female business owners tend to operate in industries that have a greater need for continuous working capital, thus women owned businesses tend to rely on revolving credit lines. Even with this demand for capital, women business owners are hesitant to apply for financing, and when they do, they are receiving a growing proportion of commercial credit, but the amount of credit granted still trails that of men. The recent growth in women owned businesses could be a driving factor in this disparity. New business have limited to no commercial credit history forcing lenders to evaluate the guarantor’s personal credit. On average, female business owners have a lower consumer credit score, which could be because they are carrying more personal debt to fund their businesses, ultimately decreasing their access to commercial credit. There are a number of factors that when combined, are limiting equal access to commercial credit for female business owners. The good news is that the number of successful women owned businesses continues to climb, and more grants and loans are available to women business owners. What I am watching While inflation in the U.S. is easing, it is still above the Fed’s 2% target. It is widely expected that the Federal Reserve will begin to lower interest rates later this year. It appears that the anticipated recession which led lenders to tighten credit will not occur. Therefore, lenders will likely begin to loosen credit criteria and potentially provide more opportunities for women-owned businesses to obtain the credit they need to operate and expand.

About the Main Street Report Experian and Oxford Economics have released the Q4 2023 Main Street Report. The report brings deep insight into the overall financial well-being of the small-business landscape, as well as providing commentary around what specific trends mean for credit grantors and the small-business community. Critical factors in the Main Street Report include a combination of business credit data (credit balances, delinquency rates, utilization rates, etc.) and macroeconomic information (employment rates, income, retail sales, industrial production, etc.). Q4 Report Highlights As we reflect on the journey of the American economy through the last quarter of 2023 and look ahead to 2024, it's clear that the resilience and adaptability of small businesses and consumers have been nothing short of remarkable. Despite facing challenges such as inflation and tighter lending conditions, the entrepreneurial spirit that defines Main Street has not only endured but is poised for growth. Unwavering Consumer Confidence Spurs Economic Optimism The U.S. economy, riding on the robustness of consumer spending, has once again demonstrated its strength. Consumers have outpaced holiday spending expectations, injecting vital liquidity into small businesses. This surge in spending has enabled these businesses to pay down debt and pivot towards capital expenditure and strategic growth planning for the coming year. The foundation of our economic optimism is solidified by the expected continuation of consumer support, bolstered by a strong labor market, and rising disposable incomes. Main Street Report Points to Easing Delinquency Among Small Businesses In the latest report, Oxford Economics anticipates an improved economic backdrop, along with a shift towards easier financing conditions, will keep the rise in corporate delinquencies muted and limit the normalization of bankruptcies over the coming year. Possibility of Changing Fed Policies Bodes Well for Innovation While headwinds such as inflation and cautious lending persist, the horizon is bright for small businesses. The Federal Reserve's anticipated policy adjustments, alongside a resilient consumer base, provide a green light for investment and growth. The adaptability and forward-thinking approach of small businesses will be crucial in harnessing these opportunities, driving not only their success but also contributing to the broader economic prosperity. Let It Grow As we stand on the threshold of 2024, the U.S. economy, powered by the dynamism of Main Street, is preparing to embark on a season of growth. The challenges of the past have paved the way for a future marked by resilience, innovation, and optimism. Small businesses, supported by a strong economic foundation and favorable policies, are set to lead the charge in driving forward the American dream. Download Your Copy of the Q4 2023 Main Street Report Today!

Get the latest quarterly small business credit trends Mark your calendars! Experian and Oxford Economics will discuss small business credit conditions when we present key findings in the latest Main Street Report for Q4 2023 during the Quarterly Business Credit Review. Michael Pearce, Oxford’s Lead U.S. Economist, will share his take on Experian’s most recent small business credit data and offer a macroeconomic outlook for the coming quarter. Brodie Oldham, Experian’s V.P. of Commercial Data Science, will cover commercial credit trends. Q4 2023 Main Street Report The Q4 2023 Experian/Oxford Economics Main Street report will be released on February 27th. If you are not already subscribed to thought leadership updates, be sure to sign up for updates on our Commercial Insights Hub.

The Beyond the Trends report highlights indicators which offer insights on labor, prices, commercial credit and economic conditions.

Retail sales reached a 4-year high of over $615B in December 2023 with yearly retail sales growing 4.6%. At the same time, lenders are tightening credit and businesses within the retail sector are showing signs of stress with higher late-stage delinquency rates and falling commercial credit scores. We see retailers seeking commercial credit less often, new originations slowing and lower lines over the past several months. As retail sales continue to rise so does the proportion of online retail sales. Online sales peaked during the COVID-19 pandemic and fell slightly once the lockdowns were lifted. Online retail sales remain approximately 56% higher than pre-pandemic levels and are trending up and may soon exceed 2020 levels. Growth in online retail sales has led to growth in retail returns. Retail returns peaked in 2022 at over $800MM and over 16% of total retail sales. Prior to 2021, retail returns as a percentage of retail sales averaged 8.9%, since 2021 that rate has grown to 14.6%. As returns increase so do fraudulent returns. Retailers have implemented strategies and solutions to address retail returns which resulted in a decrease in return dollars between 2022 and 2023 yet the percentage of returns that were fraudulent increased from 10.2% to 13.7% or over $100B. Increases in both legitimate and fraudulent returns are prompting retailers to identity solutions and operational strategies to slow growth across all returns. What I am watching: The U.S. economy expanded 3.3% in Q4 2023, and 2023 real GDP increased 2.5% over 2022. Strong consumer spending fueled the economy. Multiple sources are expecting The Federal Reserve to cut interest rates up to six times in 2024 with the rate cuts beginning in Q2 2024 and continuing into 2025. Lower interest rates likely means that consumer spending will continue at an elevated rate. As spending continues to increase, specifically in the retail sector, the need for commercial credit could continue to slow as cash-flows satisfy operational capital requirements. Cash on hand should begin to satisfy outstanding delinquencies, improving commercial credit scores resulting in improved access to commercial credit.

Small business owners’ optimism remains low due to concerns about the economy and credit conditions. According to the NFIB survey, business owners do not expect current business conditions to improve in the coming months and report that financing is their top business problem. Stringent credit underwriting policies are creating an environment where owners’ current borrowing needsare not met. According to the Federal Reserve’s SLOOS report, many lenders were loosening credit policies in mid-2022, making credit readily available to small business owners. As inflation and interest rates began to rise, commercial credit delinquencies began to increase at a rapid pace and lenders tightened credit underwriting criteria to mitigate accelerated risk. It appears that efforts have worked. Across most commercial credit financial products, the increase in delinquency rates slowed over the past few months. The loans originated under the tighter underwriting is proving to be lower risk. At the same time, account closures have increased suggesting that high risk default accounts are being removed from lenders portfolio’s thus leveling late-stage delinquency curves. As observed in the commercial credit cards space, late-stage delinquencies are leveling out. Lenders continue to issue commercial cards to lower-risk borrowers and while the average loan/line amount for all other financial products has been decreasing month over month, commercial card limits have increased. Monthly lower risk commercial card originations coupled with monthly high risk commercial card account closures is in part slowing and leveling late-stage delinquency rates in the commercial credit market. What I am watching The commercial credit market could shift in 2024. As reported in the SLOOS survey, while lenders are still tightening credit, fewer of them tightened in Q4 2023. If the economy can achieve a “soft-landing” rather than go into recession, lenders will be even more likely to loosen credit standards. The Federal Reserve is expected to start reducing interest rates in 2024, thereby making borrowingmore affordable. According to the December NFIB survey, business owners are planning capital outlays, increases in inventory, increases in hiring in the coming months but require commercial credit to do so. These business expansions will rely on the availability of credit.

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The November jobs report paints a picture of a robust yet nuanced job market. While job gains and a low unemployment rate inspire optimism for a soft-landing scenario, the cooling employment growth reflects the impact of Federal Reserve interest rate hikes on consumer and business activities. Labor shortages are gradually easing, but challenges persist, particularly in the service sector. Wage growth is slowing down, offering relief from recent highs and contributing to the mitigation of inflationary pressures. Moreover, a new layer of complexity emerges with a rise in layoffs, totaling over 16 million in the first 10 months of the year, representing a 12% increase from 2022. Although layoffs are expected to rise further as the job market normalizes, projections indicate that the numbers will stay "well within the norm." Examining specific sectors reveals unique dynamics. The health care industry, propelled by long-term structural factors, continues to add jobs, providing stability to the overall economy. Conversely, the retail trade sector experiences job losses despite strong sales, signaling the industry’s transition to online channels and COVID-related changes in retail behavior. Navigating this intricatelandscape requires keen insight into sector-specific trends and an awareness of the evolving dynamics shaping the broader economic trajectory. What I am watching: Following the positive November inflation and labor market reports, the Federal Reserve did not change interest rates at their December meeting. After the aggressive interest rate increases since March 2022, this is now the third consecutive meeting with no change, but the Fed indicated that there will be multiple rate cuts beginning in 2024 and beyond. One key to the economy will be how consumers approach holiday spending. With consumer confidence low and news of upcoming layoffs, people may tighten their belts, thereby slowing the economy. Download Report Download the latest version of the Commercial Pulse Report here. Better yet, subscribe so you'll get it in your inbox every time it releases, or once a month as you choose.