Commentary
For the first time in decades, central banks are tightening their monetary policy while governments are continuing to spend money as if nothing has changed. Large enterprises are not harmed by the most recent rate increases as long as credit conditions are still lax. However, households and small enterprises are bearing the full weight of the financial squeeze.
The current level of mortgage rates in the United States is the highest since 2008. According to Freddie Mac, the average interest rate for a 30-year fixed-rate mortgage hit 6.02 percent last week.
A perfect storm of declining sales and increased finance costs hurts small enterprises. While retail sales rose 0.3 percent in August, the data for July was corrected to indicate a 0.4 percent decline in sales (pdf). In addition, after July’s numbers were negatively revised, core retail sales were unchanged in August. This indicates a sharp decline in sales in real terms. Since official retail sales aren’t inflation-adjusted, August’s 9.1 percent increase over the prior year was actually flat….