Early in the COVID-19 Pandemic, I wrote with concern and some trepidation about the effect of the Pandemic on business. See Dentons - Back to Basics, Continued - Is there a Bright Light Shining Through the Pandemic Tunnel? There was immediately a steep decline in originations of new loans, and this fact was frightening. On the other hand, collections of outstanding loan receivables remained strong. In fact, collections and pay-offs were so good that many consumer finance companies became concerned about the loss of profits as a result of prepayments alone.

Now, well into the 16th month following the outbreak of the Pandemic, we have reliable data from which we may draw conclusions.

First, new delinquencies remain low and have not returned to 2019 levels. This is certainly true for personal finance loans. To no one’s surprise, this reflects the effect of stimulus checks sent to many Americans.

Second, purchases of consumer goods and services have increased substantially during the pandemic. The effect of the stimulus checks and unemployment compensation continue to fuel the drive for buying. The demand for consumer goods remains strong.

Next, we can expect that with the discontinuance of stimulus checks and unemployment compensation, more borrowers will be returning to work. This factor may just continue the high demand.

Finally, the specter of inflation has not really surfaced—yet. If consumers begin to suspect that inflation will only make the purchase of goods and services more expensive in the future, consumers may accelerate their purchases. For those who have tried to purchase appliances and building supplies lately, the appearance of inflation may seem even closer.

Forecasting growth and inflation remains a tricky business. But, we need to be prepared for all contingencies.

Please Note: This is the one hundred sixty-fourth blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking Dentons - Dentons Sirote Consumer Finance Report.