Americans were feeling less confident at the beginning of March, which could lead to a reduction in consumer spending and have an impact on small businesses across the country.
The Thomson Reuters/University of Michigan preliminary sentiment index for March declined to a mark of 71.8 from 77.6 in February, which is the lowest level in more than a year. This drop was unexpected, as the median forecast of economists surveyed by Bloomberg called for an increase to 78.
About one in three consumers said they expect economic growth to slow this year, up from 22 percent in January, while 38 percent believe the unemployment rate will rise, compared to just 27 percent who held that view last month.
Falling confidence can be attributed to frustration over budget issues in Washington and fear about layoffs and limited job availability.
"The frustrations expressed by consumers essentially involve how little consideration has been given to how the government's inability to reach a compromise affects people's economic situation," said survey director Richard Curtin.
With consumer confidence waning, retailers could see business take a hit. As a result, cash flow could slow and available capital might decline, which could make it difficult for these businesses to obtain a loan from a bank.
However, small retailers who find themselves in this type of situation may have other options available. As long as they have inventory in stock, they could qualify for a form of asset-based lending called inventory financing, which can provide them with a revolving line of credit using their current product as collateral.
With the ability to turn their inventory into cash, this type of financing could enable them to get through the difficult times when sales may not be as high as they usually are.