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Store Fronts Thrived In 2015 — And 2016 Looks Good, Too

This past year was a good one for store front businesses, as measured by the Index by the same name. SMB growth for those hyperlocal businesses that you’d find on Main Street USA far outpaced the U.S. economy. Here’s what happened, and what might be in store for, well, stores.

In the end, for 2015 the Store Front Business Index, powered by CAN Capital, a new entrant into the PYMNTS pantheon, showed that the small grocer, hair salon, coffee shop, restaurant, fitness center, home improvement contractor, retail boutique and other “store fronts” that are the lifeblood of the local community remain vibrant.

Though the Index itself is fairly new, with just two iterations in the year, the latest publication showed a reasonably linear trend across key metrics that can best be described as positive, with growth in the rearview mirror and on the horizon, taking into account the three drivers of store front business health: wages, employment trends and new business creation.

Continued Growth After the Great Recession

Index growth has been in the low single digits as of the most recent Index publication, which at its second edition showed a resurgence at 3 percent – nicely outpacing, in the first quarter of the year, initial GDP growth estimates of less than 1 percent.

The overall trend was even more noteworthy when posited against a longer term trend. Going back to the bad old days of the Great Recession, we can see that according to the Store Front Business Index, these businesses rebounded sharply since that nadir, up roughly 14 percent, cumulatively, as of the latest data.

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Store Front Businesses Likely to Keep Growing, But Modestly

The growth may moderate a bit, according to projections, to roughly a few basis points less, and, say around 3.3 percent year over year.  The smallest input will be the movement toward creation of new businesses themselves, according to the survey, at about 2.4 percent.

That’s still quite a bit better than the GDP growth forecasts for the nation, and that implies that this slice of small business will thrive based in part on separate industry growth dynamics, perhaps most notably in construction, which has been growing at mid-single digit percentage rates as measured year over year. 

Regional Strength

The drill down into the data revealed that business in this sector of small business has been – and will continue to be strong, especially as extrapolated, again, since the Great Recession.

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But perhaps it is most noteworthy to look at the forecasts, where we see that the growth that is the most outsized will come from the mountain and southwest regions – and because that is not necessarily pushed by store front creation, but rather wage growth and hiring.

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What’s Next?

All of this begs the question as to what will happen in an environment that has seen, just as of mid-month, a hike in interest rates. The implication would be that wages will continue to rise, at least to help continue to cover the growth in the economy (and interest rates – remember that the Fed boosted rates in a move that implies the economy’s strength is such that it can handle a rate increase, with more to come). 

To download the Store Front Business Index, click here.

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