Business Guidance

Recession? A Disconnect Between Data and Behavior  

With historically high employment, high wages and high consumer spending, it is hard to believe that the current economic circumstances are technically defined as recessionary. The big question is not whether the U.S. is currently in a recession – the big question is what’s coming next? Are the economy’s problems going to get worse in the coming months? Will the situation level out or possibly even improve?

Many key indicators such as high inflation, market volatility, rising interest rates and a tightening housing market point to an economy on the brink of recession. But the latest monthly Jobs report shows the unemployment rate decreased to a healthy 3.5% and companies added 528,000 jobs in July. This suggests an economy that is thriving more than the headlines are letting on.

While wages and employment are up, the United States has experienced negative GDP growth over the past two quarters, which typically indicates the start of a recession. But the data isn’t aligning with what is happening in the real world. For example, despite doomsday headlines about a slowdown in consumer activity, there is proof of ongoing consumer confidence. Warehouse activity continues to build up nationwide as robust consumer demand continues despite inflation. However, the current rate of consumer consumption has had consequences as credit card debt is up 13% year-over-year, the biggest jump the country has seen in 20 years. Despite the pileup of personal debt, the consumer hasn’t yet shown signs of slowing down spending.

Across the Commonwealth of Pennsylvania, business throughout various industries remains strong, especially agriculture. Overall, there is enough liquidity in the system for owners of businesses to remain confident that consumer demand may continue in the short-term. Cash flow for consumers is not pinched so a demand slowdown is not a major concern. While some business owners have recently decreased their spending in response to inflation and the threat of recession, others continue to spend and liberally invest in their businesses, taking this as an opportunity to grow. Some Pennsylvania farmers are investing extra cash flow into expanding their farms by purchasing more land, equipment and livestock, thereby furthering their businesses in the long-term.

While the media focuses on interest rate hikes, ongoing inflation and continued economic uncertainty, consumer behavior tells a different story. This makes it a challenging time for business owners to determine the best course of action. It is helpful to work with a team of experienced professionals to adjust your business plan which includes working closely with your commercial lender. This is where Univest comes in. We take the time to get to know you and your business and serve as a strategic partner for your business. See what’s possible at www.univest.net/commercial-banking or call us at 877-723-5571 to get a conversation started.

Univest Bank and Trust Co. is Member FDIC, SBA Preferred and an Equal Opportunity Lender.