US Small Businesses: Borrow more, signaling growth ahead
The borrowing of US small businesses has boosted in the last couple of moths, which has reached it highest level in nearly seven years. Economists view this increase in borrowing a signal for economic growth and could continue throughout the year. Small companies take out loans to buy new technology and equipments. Many view the peak in borrowing as a signal for a rise in hiring ahead.
This is good sign for the Federal Reserve, who has recently hired a new chair Janet Yellen. The Federal Reserve has plans to end bond-buying before the year it out if the economy does not improve and if the unemployment rate does not improve.
http://www.cnbc.com/id/101387287
This is very interesting, I am interested to see how Yellen performs in her new role in the Federal Reserve.
ReplyDeleteThere might be a strong correlation between the increase in business borrowing and investment and the increase in consumer spending that we have seen recently. In December, consumer spending has increased by 0.4%. Although that is a small increase, it can have a certain impact on small businesses borrowing. If more businesses are selling products to consumers, they receive more revenue and can feel more confident to invest more.
ReplyDeleteBusinesses are simply feeling more confident. Their earnings are growing and they are finally able to replace their PP&E which they had probably sacrificed over the past couple of years. Combine their confidence with a very low cost of debt and you will almost always see an increase in borrowing.
ReplyDeleteI feel that now that the economy has started to make a turn for the better more and more small businesses will start to thrive once again. With that more businesses will take this opportunity to expand their business which will help to lower the unemployment rate. But this is all dependent on the banks and their willingness to give loans. So we will have to wait and see how long these lending opportunities occur. Also if the interest rates become to high the incentive to expand will decrease and the growth in this sector could end.
ReplyDeleteThat is good signal. Small business is a major part of the economy. I think small business is easily influenced by each economic situation,meaning if the economy is bad, small business is financial difficulties first,and if the economy is recovered, small business finally recoverd. So, recovering the small business can prove that U.S economy almost is recovered.
ReplyDeleteThis is great for the recovery of our nations economy. Our country was built on small businesses and its nice to see a rebound of aspiring entrepreneurs taking charge. Hopefully this growth in small businesses is here to stay and isn't just a trend.
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