Insights from the April 25, 2023 Commercial Pulse Report – Stronger Economy; Tightening Credit Standards

April 25, 2023 by Emily Garman

The U.S. economy continues to be stronger than expected, even as a looming downturn is still expected.

Inflation remains persistent with March prices 5% higher than a year ago, but slowing from 6% inflation in February.

Rent inflation continued to increase in March to 8.3%, the highest in over 40 years. Food inflation declined for the seventh consecutive month to 8.5% in March, down from 9.5% in February. The cost of energy in the U.S. in March was 6.4% lower than a year ago, the first decline since January 2021.

One of the biggest drivers of inflation over the past year was energy, but in March energy was 6.4% lower than a year ago, the first decline since January 2021.

The labor market continues to be tight with low unemployment still driving wages higher, but inflation makes real wages stagnant.

With these mixed signals, it will be interesting to see if the Federal Reserve continues to increase interest rates, or if they pause rate hikes at their May 3rd meeting. New businesses are opening at a high pace, with the 2022 monthly average 44% higher than the pre-pandemic 2019 monthly average. Those newer and smaller businesses are seeking a greater portion of commercial credit and have accounted for a larger portion of new commercial accounts opened.

Both consumer and commercial delinquencies are trending upward since 2021 lows.

Delinquencies are rising in the newer and smaller business segments and may be the first to feel the brunt of tightening credit criteria.

What I am watching

As delinquency begins to rise, lenders are tightening underwriting policies. Businesses will find it harder to obtain capital and may turn to alternative funding sources besides traditional banks. Alternative lenders generally charge higher interest rates, and in a rising interest rate environment, they are getting even higher, so businesses will be hard-pressed to find affordable funding sources.

Commercial bankruptcies, which were at historical lows the past year, started to increase in Q4 2022 and are likely to continue to increase, especially if businesses in need of capital struggle to obtain it.

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.

Follow Us!

Subscribe to our blog

Enter your name and email for the latest updates.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

About this blog

The latest insight, tips, and trends on all things related to commercial risk by the team at Experian Business Information Services. Please follow us on social media.

Stay informed by subscribing to this blog

Sign up for email notifications when new content has been published by Experian Business Information Services.
Sign Up