Lawrence E. Golub, CEO of Golub Capital, said, “The boom part of 2021 boomflation has started to decelerate in the first quarter of 2022. The economy is still strong, and the 18% nominal growth in revenue year-over-year is good but it is not great. Earnings growth of 9% was closer to flat in real dollars after adjusting for the nearly 8% increase in consumer prices during the same period. Higher input costs and labor costs are weighing down profitability, even in our portfolio of market-leading businesses in resilient industries. Demand remains robust, and companies will continue to adapt if inflation remains high.”

Dr. Edward I. Altman said, “The margin compression we’ve seen in the last three quarters marks a reversal of trend from the considerable margin expansion during the recovery from Covid lockdowns. Although the acceleration in labor costs and employee turnover is a headwind for most companies, it is also an opportunity for technology firms that deliver productivity-enhancing solutions. Looking forward, with the Fed on track to raise interest rates, probably substantially, in the coming quarters, our data suggests that investors would do well to prepare for a possible scenario of stagflation. We will continue to monitor our data for early economic signs of recovery or recession.”

The Golub Capital Altman Index (“GCAI”), which is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman, is the first and longest-running index based on actual revenue and earnings (defined as earnings before interest, taxes, depreciation and amortization, or “EBITDA”) for middle market companies.