December 2023 Industry News and Trends
With inflation easing from its highs and the unemployment rate holding steady, the Fed is cautiously signaling that borrowing costs could come down toward the end of 2024.
While inflation remains elevated, the central bank is expected to reduce the federal funds rate from the current range of 5.25% and 5.5% to 4.6% by the end of 2024.
New research from Goldman Sachs indicates that small businesses are weathering the current financial climate surprisingly well, despite the fact that they typically pay higher interest rates than large enterprises.
While high interest rates are likely to curb capital expenditures and labor costs fractionally for small businesses, overall, they are in a good position to weather the rate hikes for several reasons:
- Although the cost of labor is rising, strong profits are outpacing wage growth
- Small-business cash holdings and net worth are the highest they’ve been in years
- Small businesses are turning to alternative funding options
In a survey whose results echo those of Goldman Sachs, the U.S. Chamber of Commerce Small Business Index, conducted in October 2023, found that small businesses have a worsening view of the economy, but a favorable view of their own resilience.
According to survey results, just one-quarter of small businesses consider the U.S. economy to be in good health, a decline of eight percentage points since last quarter. However, two-thirds consider their business health to be “very” or “somewhat” good, and another two-thirds say they are “somewhat” or “very” comfortable with their cash flow.