Economic slowdown (and how it’s affecting businesses)
The situation the Winwoods find themselves in is no accident.
In a general effort to keep inflation down, policymakers have deliberately made it more expensive to borrow money.
“This is exactly what we expected,” says University of Texas-San Antonio economics professor Bulent Temel.
To get a picture of how the economy is doing, Temel looks at three main numbers: GDP, unemployment, and inflation.
Two of those things are going well: “Both GDP and unemployment are at pretty good levels,” he said.
What is not at a good level is inflation, which currently stands at 6.03% – much higher than the Federal Reserve’s target of 2%.
For this reason, according to Temel, the policy “priority is to reduce inflation”.
The rising cost of borrowing, mixed with things like inflation and general uncertainty about the future, is a big reason why fewer Texas businesses are borrowing.
In the past six weeks, 31% of financial institutions surveyed by the Dallas Federal Reserve reported a decline in commercial and industrial lending.
“It’s not surprising because when companies borrow less, they spend less. And that reduced spending cools the economy and lowers inflation,” says Temel.
Not only entrepreneurs…
There have also been falls in consumer credit, money that Texans can borrow any day for things like cars, vacations or, as Texas State University Professor William Chittenden puts it, “basically anything that isn’t your mortgage loan.”
The same rising costs, inflation and uncertainty that businesses are grappling with are also being felt by consumers, who have responded by getting their spending rolling.
Data from the Dallas Fed shows that over the past month and a half, 40.6% of financial institutions surveyed said they had reduced consumer lending.
“Lower applications are usually because potential borrowers see the economy slowing down,” Chittenden says.
Another development: 11.8% of respondents to the Dallas Fed survey said they see an increase in consumer loans that are not being repaid.
“That’s sometimes a little early warning sign that things are slowing down in the economy,” notes Chittenden.
A slowdown, but not a recession… yet
Most economists would agree that the United States is not currently in a recession – but things are moving in that direction. Luckily for residents of the Lone Star State, everything is bigger in Texas.
“An advantage of [Texas] As the second largest economy in the country, we have a very well diversified economy and should be able to weather the storm,” says Chittenden.
Jobs continue to be created in Texas as well. In February alonethe state led the nation in job growth, adding 58,000 jobs.
The state also enjoys the economic benefit of large-scale migration. Last YearTexas saw more than 230,000 relocations from the United States.
Despite the slowdown, Albert and Melissa Winwood are celebrating their 23rd anniversary this year.
Courtesy of Melissa and Albert Winwood
“We have attractive demographics,” notes Chittenden, “and that allows our economy to continue to grow.”
Texas is a great state for business and economic development, which is why even for people in “survival mode” like Melissa Winwood, there are still things to celebrate – like 23 years of entrepreneurship.
“We actually [started our business] in the first week of April 2000, so this is our anniversary month,” she told the Texas Standard.
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