Consumers are the driving force behind economic expansion, and when spending picks up, all types of businesses benefit, including retailers. That said, a bump in expenditures in the near future could create a need for inventory financing among small- and medium-sized retailers, as owners of these stores will need to keep shelves full.
Deloitte's Consumer Spending Index dipped slightly in August, but the firm's senior U.S. economist Daniel Bachman said Americans are still in a good position to spend.
"While the Index fell in August, it continues to indicate that overall conditions are positive for consumer spending," Bachman said. "Americans may remain in a better position to spend, particularly as home prices increase and unemployment rates drop – both of which contribute to improved household finances and sentiment."
Part of the reason consumers could be poised to increase spending is the fact that home price appreciation has been boosting household wealth across the country. The CoreLogic Home Price Index report revealed a 12.4 percent year-over-year increase in July, and a 1.4 percent bump from the previous month. August is expected to see gains as well, with the Pending HPI projecting a 12.3 percent annual jump, and a 0.4 percent month-over-month increase.
Should consumers start to spend more money, small- and medium-sized retailers may begin to see a pickup in sales. As a result, stockrooms will need to be replenished, which can be accomplished using inventory financing.
Ideally, businesses would be able to keep shelves full on their own dime, but that isn't always the case. This form of asset-based lending enables a retailer to use current inventory as collateral to obtain a revolving line of credit, which, in turn, can be drawn from to purchase additional product.