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Phoenix Lending Survey: Inflation is Driving Economic Conditions and Consumer Spending

October 28, 2022, 07:44 AM
Filed Under: Industry News

The third quarter Phoenix Management “Lending Climate in America” survey results reveals the impact inflation is having on global economic conditions and consumer spending.

Phoenix’s Q3 2022 “Lending Climate in America” survey asked lenders to identify that greatest factor driving the softening global economic conditions. The majority of lenders, seventy-five percent, believe inflation is the greatest factor. Seventeen percent of the lenders surveyed believe that global supply chain issues is the greatest factor. Of the lenders surveyed, eight percent believe the war in Ukraine is the greatest factor driving the softening global economic conditions.

Due to inflation, consumers have increased their shopping at dollar stores and “value stores”, spending their money on necessities rather than discretionary items, including apparel and electronics. When asked, how consumer spending will trend as we enter the holiday shopping season this year, eighty-three percent of lenders expect inflation to continue rising, which will cause further economic stress in the U.S. by forcing consumers to prioritize their purchasing decisions. Seventeen percent of lenders think consumer spending on discretionary items will be strong.

Additionally, Phoenix’s “Lending Climate in America” survey asked lenders to identify what they expect will challenge borrowers the most regarding inventory in the next 6 months. Of the lenders surveyed, 50% expect too much inventory on hand will result in disposing inventory at reduced margins, creating challenges for borrowers in the next six months. However, forty-two percent of lenders believe there will not be enough inventory due to global supply chain issues, while 8% of lenders believe there will be an adequate supply.

Lenders optimism in the U.S. economy in the near term continued to decrease this quarter from 1.67 in Q2 2022 to 1.58 in Q3 2022. The majority of lenders (42%) believe the economy will perform at a “D” level during the next six months. Additionally, lender expectations for the U.S. economy’s performance in the longer term decreased from the prior quarter from 2.11 to 1.92. Of the lenders surveyed, 58% believe the U.S. economy will perform at a “C” level during the next twelve months.

“Lenders optimism in the U.S. economy in the near-term continues to decrease,” says Michael Jacoby, Senior Managing Director and Shareholder of Phoenix. “With inflation driving economic conditions, consumers are spending less, especially on discretionary items. A record 75% of survey respondents think retailers will experience the most volatility in the next 6-months. Inflation and volatility will result in excess inventory for many companies, which will ultimately lead to disposition at reduced margins.”

See the full results of Phoenix’s “Lending Climate in America” Survey.

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