The same thing is happening now to a lot of businesses who have just spent the better part of two years adjusting their spending schedules and learning to cope with increasing prices, delayed supplies and tight labor market. Now, suddenly it seems, prices are collapsing on many goods and shipping rates while other prices continue higher like Glass, Aluminum and other basic materials.
I expect prices to continue higher longer term but meanwhile it's just a constantly shifting environment which makes planning impossible. Companies that were desperate to find new hires are now laying folks off just 3 months later - it's nuts!
About 45 percent of small business owners in the United States are freezing the hiring of new workers because of high labor costs and skyrocketing inflation, according to the Alignable July Hiring Report.
Recent data on retail merchants and other businesses show the mood has soured considerably in a very short time span. It's likely that the interest rate hikes combined with the extended duration of extremely high gas prices were the "one-two" punch that took all the steam out of the stimulus-driven "recovery". Everyone is trying to guess at the next move while taking losses on inventory over-stock on the one hand and shrinking demand on the other.
"The NFIB Small Business Optimism Index dropped 3.6 points in June to 89.5, marking the sixth consecutive month below the 48-year average of 98. Small business owners expecting better business conditions over the next six months decreased seven points to a net negative 61%, the lowest level recorded in the 48-year survey. Expectations for better conditions have worsened every month this year."
This covers a wide range of businesses and there are definitely stand-outs and industries that are still experiencing robust demand. The over-all picture is one of recession however not growth except for certain industries that do well in recessions like Liquor, entertainment & home security.
Private lenders are all still making loans and rates have managed to remain stable in the 1.16-1.32 factor range - the fact that commercial rates from private lenders haven't gone up even though conventional rates have increases over 50% is remarkable to say the least. Especially when one considers the substantially increased risk many merchants will probably represent if we end up in a scorching recession.
I believe the difference is simply that our rates reflect the ACTUAL COST of unsecured capital for most merchants while conventional rates are subject to subsidy and intervention by the Federal Reserve (money printing). Therefore, the direction of Fed rates is political and can change based on policy decisions whereas free market rates are determined by supply-demand dynamics and risk profiles.