While the economy has shown a few signs of a slowing down in the past couple weeks, there is reason to believe growth could pick up in the second half of the year.
Should economic growth accelerate, purchase order financing demand could increase, as small- and medium-sized manufacturers as well as wholesalers attempt to fill orders larger than they are used to handling.
In its most recent Beige Book, the Federal Reserve said the U.S. economy is growing at a modest to moderate pace. Some of the major factors contributing to the economy include residential real estate and construction activity as well as manufacturing, which was better in most Fed districts since the previous report.
"It was unmistakably upbeat," Andrew Wilkinson, chief economic strategist at Miller Tabak & Co, told Bloomberg. "The summary is littered with evidence of improving conditions, rising demand, better loan quality and quantity, which points to the potential for improvement over the second half of the year."
Jobs market continues to contribute to economic growth
If the employment situation keeps up its momentum in the second half of the year, economic growth could accelerate even more.
June proved to be another strong month for the jobs market, with 195,000 new positions being added to the economy, according to the U.S. Department of Labor. Employment increased in leisure and hospitality, professional and business services, retail trade, health care and financial activities. This was more new jobs then expected, as economists surveyed by Bloomberg called for a 165,000 gain.
"Job growth is starting to hum along," Jonathan Basile, director of U.S. economics at Credit Suisse Holdings USA, told the news source. "All of it is laying the groundwork for more spending and more jobs. This virtuous cycle is really taking hold for the second half of the year."
Purchase order financing demand could rise with a better economy
As the economy shows improvement, business at small-to medium-sized manufacturers and wholesalers could pick up. That said, these businesses might need to rely on some sort of financing to fill large orders as they often have limited available capital.
If turned away by a bank, purchase order financing could prove to be beneficial. This type of lending agreement enables businesses to receive up to 100 percent of the funds needed to complete an order, which can help prevent owners of these companies from having to sell equity.