U.S. small businesses are growing despite trade uncertainty
Confidence in the U.S. economy remains high.
September 16, 2019 – Small business spending is increasing, with Visa’s Small Business Spending Index up 18 points. Following a quarter of flat growth, small businesses are expanding and their revenues are increasing. According to Visa's small business survey conducted in late June, nearly half of small businesses said their revenues have increased in the past three months, up 5 percentage points from the first quarter, and almost a quarter hired more employees, up 9 percentage points. Confidence in the U.S. economy remains high, with more small businesses saying the economy had grown stronger last quarter. However, as tariffs continue to make headlines, one in five businesses worry their business will suffer in the years ahead.
While trade uncertainty is causing some concern, small businesses remain positive overall. They continue to invest in their businesses and expand, which supports overall economic growth. Wayne Best, Visa Chief Economist
Source: Visa data. Last actual: Calendar year 4Q2018. *Per active account.
Visa Small Business Spending Index (Payment volume on Visa business credit cards,* indexed to 1Q2013)
Borrowing growth decelerated year-over-year due to higher interest rates that discouraged borrowing through the first half of 2019. However, with the Federal Reserve’s recent rate cut, borrowing growth may pick up.
Risk remains elevated as businesses increase their spending. Despite a drop of one point in the second quarter, the charge-off index remains at heightened levels. On the other hand, delinquencies have dropped due to seasonal factors.
Advertising, which continues to be a key spending driver, has grown year-over-year; however, more than half of business owners struggle to understand the practice, such as knowing the most effective advertising channels or how to target the right audience.
Small businesses planning to spend more (by region)
Source: Visa Business and Economic Insights quarterly small business survey, conducted by Kelton.
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