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Highlights from the latest Beyond the Trends report Are you curious about the trends affecting the small business economy?  The just released Summer 2023 Beyond the Trends report is packed with valuable insights based on data from over 25 million active businesses and the expert opinions from Experian’s V.P. of Commercial Data Science.  This post covers some of the report's highlights, download your copy for the full scoop. A word from the report’s author: Energy Prices and Consumer Relief One of the most crucial takeaways from the report is that consumers and small businesses can expect continued relief in fuel prices in the coming months. This relief is due to the increased production of fuel in the United States and other countries. This production, coupled with other global and domestic factors, will provide more affordability in fuel costs for consumers and small businesses. This will help them manage their expenses better and, in turn, help producer costs decline, leading to more positive economic developments. Small Business Delinquency Small businesses, especially those that were propped up by stimulus money, are beginning to feel the pinch of inflation that is eating into their margins. Due to this, their savings are running lean, and many businesses are experiencing a rise in delinquencies. Delinquency rates have now exceeded pre-pandemic levels. Still, the report suggests that this is where they would expect delinquencies to be as the economy begins to grow gradually. Optimism Amidst Challenges Despite the lingering challenges and uncertainties brought about by the pandemic, small business owners remain optimistic. The report shows that the overall sentiment among small business owners is still positive, and they continue to seek out opportunities and innovations that could lead to growth and success. This is a positive development, and it's critical for businesses to continue to be agile and open to new opportunities and ideas. In closing: Small businesses are facing challenges such as filling job openings, higher costs,  delinquencies and rising debt, but they remain optimistic and focused on opportunities for growth. By staying true to their values and fundamentals, businesses can thrive even in uncertain times. Grab your copy of the Summer 2023 Beyond the Trends report for more interesting insights on small businesses and their challenges. Download Beyond The Trends Summer 2023 Report

The post-pandemic economic landscape is experiencing an alarming rise in fraudulent activity affecting both businesses and consumers. With 75% of creditors experiencing heightened fraud losses and a 50% increase in fraud reports as per the FTC, the situation grows increasingly challenging. The expansion of e-commerce and the increasing sophistication of the dark web as a marketplace for stolen data exacerbate cybercrime threats. Moreover, lenders struggle to differentiate vast numbers of newly-formed businesses from bad actors due to limited data history available for decisioning. Amidst this, while Artificial Intelligence offers substantial promise in combatting fraud, it also significantly expands fraudsters’ toolboxes and poses significant fraud risks to creditors and consumers. To address these pressing concerns, businesses must step up their fraud risk management game by proactively adopting new fraud detection data and capabilities, and by integrating commercial entity and consumer data into their fraud decisioning strategies. What I am watching: The latest inflation report and jobs report showed positive news for the economy. Unemployment remains low and job creation is slowing but still strong. Inflation was down to 3% in June, the lowest in over two years, and closing in on the Fed’s target of 2%. Despite earlier indications of more interest rate hikes this year, this encouraging news may lead the Fed to leave interest rates alone at their upcoming July meeting. Subscribe Today 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.

Job satisfaction, or the lack thereof, is causing a shift in the workforce. Over half of employees in the United States are “quiet quitting” and actively looking for other jobs. In part, this is driving the number of self-employed individuals to rise. Growth in the self-employment rate for females is outpacing that of males. Female business owners account for double the number of new businesses open less than two-years when compared with males. Female business owners are seeking credit but across most industries receive less funding. Male and Female business owners have comparable credit risk profiles and utilize a similar mix of commercial credit products, yet male business owners, on average, receive higher credit funding amounts. Even in most industries where new credit originations skew to one gender, male business owners are granted higher credit funding amounts. This disparity in commercial credit lending has an adverse affect on female business owners and forces them to pursue other financing options. What I am watching: As an impending recession approaches, the labor market is expected to constrict which will reduce options for employees. Job vacancies are likely to be limited, quits will decline and self employment will slow as individuals seek the security of more traditional jobs. While people may not take the leap to start their own business as much, it will be interesting to see if the vast number of new businesses created over the past couple of years can survive an economic downturn. Subscribe Now 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.

The annual inflation rate continued to decline with May coming in at 4% which was the eleventh consecutive monthly decrease and the lowest level since March 2021. Lower inflation is driven primarily by lower energy costs which decreased 11.7% year over year. Core inflation, which excludes volatile energy and food, slowed to 5.3%. Despite inflation still much higher than the Fed’s 2% target, the Fed paused interest rate hikes after 10 consecutive rate increases in the last 15 months. The Fed indicated that additional hikes may come later this year. New businesses continue to open at a high rate. Despite that these newer, and specifically smaller, businesses are making up a larger and larger portion of commercial credit, they have additional funding needs. According to the Federal Reserve’s 2023 Small Business Credit Survey, almost 70% of businesses with zero employees use personal funding sources for their business while only 27% of them obtain funding from financial institutions or lenders. Since the non-employer businesses reported on 36% had a decline in revenue in 2022 (vs. 38% of employer businesses’ revenue declined in 2022), there is a huge opportunity for financial institutions to tap into this market and support small business growth. What I am watching Small businesses with very few or no employees flourished coming out of the pandemic. It will be interesting to see how many of these micro-businesses will survive the headwinds of inflation, higher interest rates and less access to credit. With an economic slowdown on the horizon, the Fed actions in the coming months will be critical to the outcome. It is yet to be determined if the U.S. economy will achieve the hoped-for soft landing rather than a recession. Download your copy of Experian's Commercial Pulse Report today. Better yet, subscribe so you'll always know when the latest Pulse Report comes out. Subscribe Today

As of Q1 2023, Metropolitan-Core contained 78.1% of businesses, up from 76.3% in Q1 2018. The growth came despite high vacancy rates in offices due to the rise in telecommuting. Remote working has been around for a long time, but became vastly more prevalent during the COVID-19 pandemic when people were required to stay home but employers wanted to continue business operations. As the height of the pandemic gets farther in the rearview mirror, more employers are requiring employees to come back to the office. However, more workers are still working remotely, at least part of the time, than before the pandemic. With fewer people going into offices, there is a shift of population clustering in metro-centers where office buildings are located to areas outside of the metropolitan-core in more suburban and rural areas. With more people spending more time closer to their homes, they patronize businesses near their homes, driving the post-pandemic growth rate of businesses opening to be much greater outside of the metropolitan-core areas. The labor market continues to be robust. 339K jobs were created in May, the most in four months, and way above market forecasts of 190K. On the flip side, unemployment ticked up in May 3.7% from 3.4% in April, and is now the highest level since October 2022. What I am watching: The high rate of post-pandemic new business openings is fueled by small businesses with fewer than 20 employees. Some of the businesses are even home-based side jobs by individuals working remotely for their primary job. It will be interesting to see how many of these small businesses can survive through the expected upcoming economic slowdown or recession. With higher interest rates and commercial lenders tightening criteria, businesses that are struggling will have a tough time securing financing to weather any upcoming storms. Now that the Federal government raised the debt-ceiling and averted a government default, all eyes will turn back to the Federal Reserve’s battle to fight inflation. They indicated a pause in interest rate increases starting with their June 14th meeting. However, with the labor market still robust, the Fed’s decision may be a swayed by the May inflation report that is scheduled for release on June 13th. Download your copy of Experian's Commercial Pulse Report today. Better yet, subscribe so you'll always know when the latest Pulse Report comes out. Subscribe Today

Women led businesses lag behind on venture capital funding, and are turning to commercial loans and lines to bridge the gap Start-ups founded or cofounded by women receive only 44% of financial backing, but generate more revenue. While it is very encouraging to see the progress of women in business advancing, the pace of progress is slow and more could be done to achieve parity. Women’s salaries are slowly catching up, but they are still only about 80% of men’s wages. There are continued barriers to mothers participating in the labor force due to the limited capacity of childcare facilities, the high costs to families for childcare, and the low wages for childcare workers making lower skilled work sometimes more attractive in a tight labor market. These forces disproportionately affect women whether they work for wages or work for themselves as a small business owner. In addition to the issues facing women as workers, there are unique challenges they face as start-up founders as well. There is a known disparity in the funding provided to start-up businesses pitched by a woman versus a man and that is leaving women without the full funding they need to launch new businesses successfully. Added diversity within venture capital and angel investor groups could help change this dynamic so women can access that capital and expertise when launching their businesses at the same rate as their male counterparts. Without this, they are left to rely on self-funding and loans from banks — if they can get approved. The good news is that many women are making it work and the number of successful women-owned businesses continues to climb. What I am watching: The debt-ceiling standoff continues to cause uncertainty in the financial system with no compromise in place and a looming June 1 deadline, according to Secretary Janet Yellen. This situation is going to dwarf all others until there is a resolution, so all eyes are going to be on Congress and the President. Other signs in the economy suggest that inflation may finally be responding to the aggressive interest rate hikes enacted by the Fed. The Fed will have a more difficult decision on whether to raise interest rates one more time in June or hold them steady and wait to see if inflation continues to improve. Subscribe Today Download your copy of Experian's Commercial Pulse Report today. Better yet, subscribe so you'll always know when the latest Pulse Report comes out.

In its continued efforts to tame inflation, the Federal Reserve increased interest rates ¼ point last week, the tenth consecutive increase in just over a year. The cumulative increase is 500bps since March 2022, bringing the Fed Funds rate to 5.00%-5.25%, which is the highest since 2007. While inflation is still above the Fed’s target rate of 2%, they indicated a pause in rate increases. The labor market continues to be strong with April unemployment down to 3.4%, matching the low of January which is the lowest unemployment since 1969. Despite all the efforts by the Fed to have a soft landing, the economy could be upended if Congress does not increase the debt ceiling soon. With inflation slowing, and the labor market strong, a soft landing is possible. Treasury Secretary Yellen said the U.S. could default on debt as early as June 1st. If the U.S. defaults on outstanding debt, many forecast disastrous impacts to the world economy. Despite the recent decline in residential construction spending, construction spend remains strong in both residential and non-residential sectors. The construction industry is one of the few industries that saw a boom throughout the pandemic. Even though over the past few months both residential and non-residential experienced a decline in construction starts and construction spend, the volumes remain above pre-pandemic levels. High construction demand is being met with the formation of many new construction companies. New construction companies are seeking credit at a higher rate, but delinquencies in the construction industry are increasing. Higher risk and higher interest rates are causing commercial lending to tighten, and construction companies are seeing fewer loan originations and smaller loans/lines of credit. What I am watching: The non-residential construction industry is expected to see steady growth in 2023 due to project backlogs but could slow in 2024. Due to higher mortgage rates, the residential construction industry is expected to see a significant decline in housing starts through 2023 with the sector stabilizing in 2024. Aside from the immediate key drivers of interest rates and cost of capital, other areas of focus will be on the labor force and the demand for skilled vs. non-skilled labor. The number of skilled workers is decreasing yet the demand for skilled labor is increasing. The construction industry will have to attract the necessary talent to support the growth. Operational changes in the construction industry will be a driving factor. The construction industry is seeing a shift toward technology in all aspects of construction. Utilization of robotics is increasing which could replace portions of the workforce. Smart Cities, Smart Homes, Green Building are all trending which will materially change construction projects. The Construction Industry is experiencing a noticeable shift and companies will continue to adapt to keep up with demand.

Gain insight on small business credit conditions by attending our quarterly webinar.