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ISM Indicators & Rising Consumer Spirits: What’s Next?

August 15, 2023

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Navigating today’s US economy, especially for the average consumer, can feel like reading a mystery novel, or tea leaves, or the flight pattern of birds like the Romans used to do. Especially for those of us who are paying attention to alternative assets and MCAs. Things got even more interesting this week as further data points to contrasting signals between businesses and consumers.

What’s going on?

Close-up Photo of Survey Spreadsheet Consumer
Split opinions between businesses and consumers. Photo by Lukas.

A Split Economy: Business vs Consumer Sentiments

Business Worries: Respected indicators like the Institute for Supply Management (ISM) manufacturing survey, hint at a looming recession. Again. Banks are tightening lending standards, and there’s less demand for business loans as a result with more and more SMEs being turned away.

Consumer Confidence: Despite these business apprehensions, consumers are painting a much brighter picture. With a surge in consumer confidence, households appear optimistic, probably thanks to disinflation. From a 6% inflation rate at the year’s start, we’re now hovering around 3%.

What’s Fueling Consumer Confidence?

Disinflation’s Role: While we started the year with an inflation rate above 6%, it’s now around 3%. This decrease in inflation boosts consumer purchasing power and helps people to feel a bit more relaxed and optimistic about the future.

Labor Market Dynamics: Historically strong, the labor market has shown hints of slowing down. But it’s far from collapsing. Though wage growth has dipped slightly, the job market is remarkably resilient.

Interior of a Grocery Store showing fruits and vegetables.  Consumer
Consumer sentiment is good and spending is strong. Photo by Pixaby.

Takeaways for MCA Investors

Opportunities Amidst Challenges: As banks become stricter, businesses might turn to MCAs for funding. This shift offers opportunities, but risk assessments are always important to make sure the opportunities align with your liquidity needs and risk appetite.

Stay Updated: The economic landscape, especially GDP growth, will influence business growth and, in turn, their repayment capacities. Staying informed is a good idea.

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