A report by the Bank of America Institute concludes that despite economic headwinds, small businesses continue to strengthen in a variety of areas, including credit and debit card spending, business travel expenditures and payroll payments.
“Despite economic headwinds like high inflation, small businesses are heading into the fall with cautious optimism,” said Anna Zhou, an economist for the Bank of America Institute. “We see things like the rebound in small business travel and resilience in payroll payments as further evidence the economy is getting back on track.”
The report is designed to provide a current assessment of small business spending activities and financial well-being. It says that one important reason for the continued resiliency in small businesses is the return of business travel. The Bank of America Institute’s report cites information from the U.S. Travel Association showing that business travel accounted for more than a quarter of total travel spending in the U.S. prior to the pandemic and now the number of travel transactions per small business client is at 90% of the 2019 annual average, the highest level since the pandemic began. Small business travel spending includes airline tickets, lodging, cruise line tickets, car rentals and other transportation. For small businesses with annual sales above $1 million, credit and debit card spending per client for travel was up the most, at 43% year over year in August.
Overall for small businesses, credit card spending for travel increased 31% year over year in August, up from a 19% increase in July, according to the report. The report said this likely reflects prices coming down in certain travel-related categories.
“Prices peaked in May 2022 for airfares and lodging but have been moderating steadily since,” the report said.
The Bank of America Institute report found that small businesses also continue to see strength in payroll payments. The average overall payroll spend was up 11% year over year in July on a 3-month rolling average, suggesting robust hiring and wage growth momentum. While restaurant and bar payroll payments have come down from recent highs, in August 2022 they remained up by 18% from where they were in August 2021. The report said that payroll deposits in Bank of America accounts indicated that after-tax wages paid by small businesses to employees were up 6.1% year over year on a 3-month rolling basis in August. The 6.1% result was above the 5.2% increase in average hourly wages that had been reported for August by the U.S. Bureau of Labor Statistics.
“Payroll spending growth is a good indicator of small businesses”™ employment activities,” the report said. “Interestingly, inflation worries seem to be easing for small businesses despite overall price pressures edging higher in August.”
The Bank of America Institute notes that its reports are prepared using data about the Bank of America”™s 67 million consumer and small business clients.
