Exploring Economic Trends: A Deep Dive into Recent Small Business Lending Data

The small business landscape continues to shift, and due to a few recent trends we identified the need to take a step back to get a better view of the big picture. Here, you’ll find key takeaways from our latest Small Business Lending Indices (SBLI) and learn what is impacting the economy overall.

Strong Momentum in Lending Activity

Recent data points indicate a notable uptick in lending activity with a 3.6% increase month over month. While monthly figures can be volatile, a three-month moving average paints a slightly more stable picture, hovering around 3.5%. This suggests consistent moderate lending activity — a positive sign considering prevailing tight credit conditions and unchanged interest rates.

Factors to Watch

Two critical factors stand out on the economic horizon: consumer demand and job growth. While consumer demand has remained resilient in Q1, questions linger regarding the sustainability of job growth and its potential impact on inflation. Economic stability rests on both sustained consumer demand as well as robust job growth, so we are closely monitoring both trends. 

Labor Market Dynamics

The labor market continues to display strength, with job growth outpacing expectations. However, the rapid pace of job creation, exemplified by the addition of 303,000 jobs in March alone, raises concerns about overheating. Despite this, wage growth remains moderate, alleviating immediate inflationary pressures.

Inflation Concerns

Inflation, a perennial worry for businesses, has seen fluctuations. Following a downward trend in 2023, inflation rates have stabilized in early 2024, signaling potential challenges ahead. Core inflation, excluding volatile components like food and energy, has shown signs of stalling or even reversing. These concerns could influence the Federal Reserve's stance on interest rates, with market expectations adjusting accordingly.

Implications for Small Businesses

For small businesses, inflationary pressures have been a significant concern. While inflation worries eased temporarily, recent data points hint at a resurgence in apprehensions. Nonetheless, small businesses continue to hire steadily, reflecting cautious optimism. Moreover, concerns about labor quality, while persistent, have shown a downward trend, offering a glimmer of hope amidst uncertainties.

Focusing on Forward

Although vigilance is warranted, the economic landscape presents a mix of promising indicators and potential, positive challenges. Navigating these dynamics requires a nuanced understanding of evolving trends and their broader implications. By staying informed and adaptable, businesses can position themselves to thrive in an ever-changing economic environment. One way to stay ahead of trends is to register for our Market Pulse webinars for the most relevant insights and discussions surrounding pressing economic topics.