Recession Warning: US Small Businesses Struggling to Pay Rent
In another sign of a struggling economy, small businesses are having an increasingly hard time paying rent.
According to Alignable’s November Rent Poll, 41% of US small businesses reported they couldn’t pay their rent in full and on time in November. That was a 4 percentage-point increase from the previous month.
Alignable surveyed 6,326 US small businesses between Nov. 19 and Nov. 22.
The number of small businesses failing to make rent payments has increased steadily over the last several months. Delinquency rates increased 7 percentage points from 30% to 37% in October.
According to Alignable, delinquency rates typically fall in Q4 with more money coming into most businesses. “But so far this quarter, the opposite has been true.”
Small businesses surveyed by Alignable cited several reasons for their struggles to make rent.
- Increasing rents: Fifty-two percent of small businesses said their rents have gone up, putting a strain on their budgets.
- Declining Revenue: Forty-one percent of small businesses said they are generating half or less revenue than they earned pre-COVID.
- Reduced Consumer Spending: In October, 59% of small business owners said consumers purchased less from them than the prior month. That number skyrocketed to 73% in November.
- Inflation: Sixty percent of small businesses said inflation was putting them under significant strain.
The retail sector is being particularly hard hit. Forty-four percent of small businesses in the retail sector reported rent delinquency. More than half (52%) said they don’t expect to see any improvement in their businesses in the fourth quarter.
Alignable provided some other data on the retail sector that backs up the pessimism.
- 40% expect to make less in Q4 ‘22 than they did in Q4 ‘21
- 10% say inflation’s so bad, they might need to close,
- 1% have already shut down
- 41% say Q4’s been disappointing so far, but they still hope for a surge in sales
- And only 8% expect Q4 ‘22 will be their best quarter ever
Rent delinquency in the small business sector, along with other economic data, supports the conclusion that the US economy is already in a recession. Peter Schiff called it a “stealth recession” because “nobody wants to acknowledge that it’s actually here.”
But it’s pretty clear that between rising prices squeezing everybody’s wallet and slowing economic activity, the US economy is not in a good place.