This week Experian and Oxford Economics released the Q4 2022 Main Street Report. The report provides insight into the financial well-being of the small business landscape. Critical factors in the Main Street Report include business credit data (credit balances, delinquency rates, utilization rates, etc.) and macroeconomic information (employment rates, income, retail sales, industrial production, etc.).
Consumer sentiment improved in Q4 2022, despite a softening of spending behavior. This positive behavior has contributed to the positive health and growth perspective of small businesses heading into 2023, leading to stable cash flow performance. In addition, commercial lending markets remained open and commercial delinquencies returned to pre-pandemic levels. However, higher goods and services costs may pressure spending as affordability tightens and personal cash flows thin.
The US economy grew strongly in Q4 2022, but the core of the economy was soft, indicating that a repeat performance in early 2023 is unlikely. The trend in job growth has decelerated, and the Fed needs to engineer a soft landing. The Fed is pushing back against market expectations of rate cuts and is likely to hike more than expected.