This year has been a mixed bag for consumers, with higher income taxes reducing paychecks, but a stronger labor market providing hope. It appears as though Americans' spending is poised for growth, with favorable conditions in the economy.
For small- and medium-sized retailers, this could mean higher sales levels, and potentially a greater need for inventory financing as they attempt to keep shelves full.
One good sign for consumers is the fact that the number of first-time applications for unemployment benefits has remained low. Despite an increase of 15,000 in the week ending September 14, according to the U.S. Department of Labor, the bump was less than expected as economists surveyed by Bloomberg called for a rise to 330,000.
"The labor market is genuinely improving," Brian Jones, senior U.S. economist at Societe Generale, told Bloomberg. "Even if they're working through the backlog, these numbers seem to have a little more behind them than just processing problems."
Americans have also been the beneficiaries of strong home value appreciation, which has bolstered household wealth. According to the latest Zillow Real Estate Market Report, appreciation reached 6 percent for the first time since 2006 in July.
"After three straight months of annual home value appreciation above 5 percent, the U.S. housing market recovery has proven it is on very sound footing," said Dr. Stan Humphries, chief economist at Zillow.
When conditions in the economy favor consumers, spending levels can rise. Should this result in higher retail sales levels, these businesses will run into the need to replenish stockrooms. To accomplish this, inventory financing could be of assistance. This form of asset-based lending allows retailers to use current product as collateral to obtain a revolving line of credit, which can be drawn from to keep shelves full.