Press Releases
January 13, 2023
Phoenix Lending Survey Results Reveals Inflation is Expected to Continue to Impact the Economy Well into 2023
Philadelphia, PA (January 13, 2023) — From the fourth quarter Phoenix Management “Lending Climate in America” survey results reveals that inflation continues to plague the economy and is expected to do so well into 2023..
Phoenix’s Q4 2022 “Lending Climate in America” survey asked lenders how the average consumer will approach their holiday spending. The majority of lenders, sixty percent, believe an increase in prices will result in less holiday spending, but will not result in a material decrease from prior years. The other forty percent of the lenders surveyed believe that consumers will reduce their Q4’22 spending, which will have the greatest effect on small business relying on holiday revenue.
Due to inflation, small businesses (on average) have had to raise prices by more than 9% to offset increasing costs. When asked how small business will trend for the remainder of FY2022 and the beginning of FY2023, eighty percent of lenders expect inflation to continue to impact the economy well into FY2023, which will cause already tight margins to be squeezed even more if prices are not raised to offset any increased costs. Twenty percent of lenders believe inflation is at its peak and the economy will begin to normalize, giving relief to the increased commodity prices and material costs.
Additionally, Phoenix’s “Lending Climate in America” survey asked lenders to identify how their borrowers are allocating any excess cash. Of the lenders surveyed, sixty percent expect any excess to go towards building a cash reserve to defend against any further downturn. However, forty percent of lenders believe their borrowers will use excess cash to catch up on payments to any of their stretched vendors.
Lender optimism in the U.S. economy in the near term increased slightly this quarter from 1.58 in Q3 2022 to 1.60 in Q4 2022. The majority of lenders (60%) believe the economy will perform at a “C” level during the next six months. Additionally, lender expectations for the U.S. economy’s performance in the longer term decreased to 1.80 versus the prior quarter of 1.92. Of the lenders surveyed, 80% believe the U.S. economy will perform at a “C” level during the next twelve months.
“Lenders’ near term optimism in the U.S. economy increased slightly in Q4, despite the ongoing headwinds of inflation and continued interest rate increases” says Michael Jacoby, Senior Managing Director and Shareholder of Phoenix. “Lenders are pessimistic regarding the longer term, and appear to be battening down the hatches for a rocky road in 2023 based on their expectation to tighten loan structures, increase interest rate spread, and a dramatic slowdown of growth by their customers as well as their expectation for increased volatility from the retail, construction and real estate industries.”
To see the full results of Phoenix’s “Lending Climate in America” Survey, please visit http://www.phoenixmanagement.com/survey/
About Phoenix:
For 35 years, Phoenix has provided smarter, operationally focused solutions for middle market companies in transition. Phoenix Management Services® provides turnaround, crisis and interim management, specialized advisory for both distressed and growth-oriented companies. Phoenix Transaction Advisory Services® provides quality of earnings, operational diligence, Quality of Enterprise®, management/organizational reviews, business integration, sell-side business preparation and other transaction related support. Phoenix IB® provides seamless investment banking solutions including M&A advisory, complex restructurings and capital placements. Phoenix IB is a U.S. registered broker-dealer and member of FINRA and SIPC. Proven. Results.®
If you would like to learn more about Phoenix, please visit http://www.phoenixmanagement.com or http://www.phoenix-ib.com.
