SB Authority: Discretionary Consumer Spending Slowed Down in May

The index issued by the SB Authority reveals that economic activity of small businesses increased a mere 0.35 percent in May compared to the previous month. The index for May reached 104.89 points. The small increase was driven mostly by the creation of new businesses and the Russel microcap.

The index registers monthly results on six other components – the prime rate, default loan rate of small business, processing volumes of merchants, reports on national employment, retail sales, and loan origination.

The chief executive officer and president of Newtech Business Solutions, Barry Sloane, said that the US economy was slowing down despite federal efforts. He explained that the slow-down trend continued despite the fact that the Federal Reserve purchased assets worth trillions of dollars from financial institutions, and the 600 million dollars invested in long-term government obligations. Also, budgetary stimulus does not appear to have any positive impact yet. Barry Sloane added that rising employment and the discretionary spending of consumers are the two main factors on which small businesses rely on to increase their economic activity.

As consumers increase their savings to protect themselves from loss of income in a climate characterized by job insecurity, their spending decreases, they pay less and less of their debt and they have to face rising energy and food costs. This consumer behavior also prompts small businesses to put a hold on their investments and employment for future growth.

Newtech provides business services to more than 100,000 companies. The US is estimated to have some 27.5 million small and medium-sized companies, which account for almost 99.7 percent of American employers.