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D&B’s Chief Economist Paul Ballew highlights the key findings on U.S. businesses for April 2014, in the May edition of U.S. Economic Health Tracker. The Tracker examines three macro indicator dimensions: the Small Business Health Index (SBHI), U.S. Jobs Health and U.S. Business Health Index .
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Paul Ballew, Chief Data & Analytic Officer, D&B
Tuesday, April 29, 2014 – 8:30AM
Economic Briefing
Follow us on Twitter @DnBEconomy
#DnBEconBrief
Executive summary
• D&B’s proprietary measures on business activity continue to send conflicting messages about the US economy
• The Small Business Health Index stabilized in the most recent monthly reading but a stronger recovery was expected with the improvement in weather across the country
• On the employment front D&B continues to assess a gradual improvement with payrolls projected to grow in excess of 200,000 this month
• D&B’s Economic Health Tracker continues to flash positive signals regarding the financial health of the private sector across most verticals and geographies
2#DnBEconBrief
Small Business Health Index
• The Small Business Health Index stabilized in the current month following a number of months of erosion
• The indices for major industries show no significant movements• There are areas of improvement, like improved payment performance,
but overall most activity stabilized in the current month
3#DnBEconBrief
SBHI: Revisiting the past year by industry…
• The performance of the major industries have been tepid starting in the final quarter of 2013
• Some weather-sensitive sectors like Construction and Real Estate remain historically below average, but all sectors seem to similarly affected by the recent bout of harsh weather
4
Mar 2013
Apr 2013
May 2013
Jun 2013
Jul 2013
Aug 2013
Sep 2013
Oct 2013
Nov 2013
Dec 2013
Jan 2014
Feb 2014
Mar 2014
70.0
80.0
90.0
100.0
110.0
120.0
Small Business Health Index by Sector: The past year
Overall Retail ConstructionBusiness Services Real Estate
...and geography
• While most top-performing MSAs show modest improvements in the past year, the performance of the slowest ones have plunged
5
Q1 2013 Q2 2013 Q3 2013 Q4 201380.0
100.0
120.0
140.0
160.0
180.0
200.0
Small Business Health Index: Top performing MSAs
Miami, FL Atlanta, GANshvlle-Dvdson, TN San Antonio, TX
Q1 2013 Q2 2013 Q3 2013 Q4 201360.0
70.0
80.0
90.0
100.0
110.0
Small Business Health Index: Slowest Performing MSAs
Chicago, IL Phoenix, AZSalt Lk City-Ogden, UT Richmond, VA
On the brighter side, the recent erosion in payment performances seems to be stabilizing
• The increase in dollar delinquencies that have caused some concern during the recent months have fallen back to their pre-winter levels this month
6
Jan 2012
Mar 2012
May 2012
Jul 2012
Sep 2012
Nov 2012
Jan 2013
Mar 2013
May 2013
Jul 2013
Sep 2013
Nov 2013
Jan 2014
Mar 2014
2.5%
2.7%
2.9%
3.1%
3.3%
3.5%
3.7%
3.9%
Small Business Dollar Delinquencies
Percent Dollars 91+ Days Past Due
Source: D&B Proprietary Data
Availability of credit to small businesses isimproving…
• Small Businesses are resorting to more conventional avenues of credit and decreasing credit card usage
Source: Job Openings and Labor Turnover Survey, (BLS), Haver Analytics and D&B Proprietary Data
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
1,000
1,500
2,000
2,500
3,000
3,500
4,000
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
Trend: Number of Loan Accounts
Private Sector Job Openings, thousands (Left)D&B Proprietary Number of Loan Accounts, thousands (2 quarters prior, Right)
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$17,400
$17,600
$17,800
$18,000
$18,200
$18,400
$18,600
$18,800
$19,000
Trend: Credit Card Current Balances
S&P US Private Label Credit Cards, Outstanding Balance, $M (Left)D&B Proprietary Credit Card Current Balances, $M (4 quarters prior, Right)
The Small Business Administration reports increases in amounts of loan approval and a reduction in charge off amounts for U.S. small businesses
8#DnBEconBrief
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013$0
$5,000,000,000
$10,000,000,000
$15,000,000,000
$20,000,000,000
$25,000,000,000
$30,000,000,000
$35,000,000,000
7(A) regular Total --All types of loans
Source: The U.S. Small Business AdministrationSmal
l Bus
ines
s Loa
n Ap
prov
al A
mou
nt ($
)
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,0007(A) regular Total --All types of loans
Source: The U.S. Small Business Administration
Smal
l Bus
ines
s Cha
rge
Off
Amou
nts (
$)
… and charge-off rates have plunged
9
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 20130.0%
1.0%
2.0%
3.0%
0.0%
0.4%
0.8%
1.2%
1.6%
2.0%
Charge-off rate on Business Loans
All Business Loans, Federal Reserve BoardSmall Business Loans, D&B database
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 20130.00%
0.40%
0.80%
1.20%
1.60%
Charge-off Rate on Credit Card Loans
• Charge-off rates on all small business loans have declined significantly in the past few years
U.S. Jobs Health
10#DnBEconBrief
• D&B expects 208,000 jobs to be added to Nonfarm Payroll• Manufacturing and Business Services feature the major gains• Retail begins to strengthen while Real Estate features losses this month
Nonfarm Payroll Employment saw severe declines during the last recession…
11#DnBEconBrief
-8,000
-7,000
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
Nov 1948-Oct 1949 Jul 1953-May 1954 Aug 1957-Apr 1958 Apr 1960-Feb 1961 Dec 1969-Nov 1970 Nov 1973-Mar 1975
Jan 1980-Jul 1980 Jul 1981-Nov 1982 Jul 1990-Mar 1991 Mar 2001-Nov 2001 Dec 2007-Jun 2009
Source: Bureau of Labor Statistics
Tota
l non
farm
em
ploy
ees,
Tho
usan
ds S
A
Over seven million jobs were lost from the start of the recession to the end—more than the prior four recessions combined
... but a bounce back may be underway
12#DnBEconBrief
March 2014 marked a significant turning point in the labor market. All private nonfarm jobs that were lost since the beginning of the financial crisis were gained back
Dec-2007
Mar-2
008
Jun-2008
Sep-2008
Dec-2008
Mar-2
009
Jun-2009
Sep-2009
Dec-2009
Mar-2
010
Jun-2010
Sep-2010
Dec-2010
Mar-2
011
Jun-2011
Sep-2011
Dec-2011
Mar-2
012
Jun-2012
Sep-2012
Dec-2012
Mar-2
013
Jun-2013
Sep-2013
Dec-2013
Mar-2
014-10000
-8000
-6000
-4000
-2000
0
2000Cumulative Change in Total Private Employment (SA, Thous)
Source: Bureau of Labor Statistics
U.S. Business Health Index
• The overall US Business Health Index continued its upward trend in April to reach 53.7%. The index recorded its seventh-consecutive sequential increase. Once again reaching the highest level since the inception of the report in December 2010.
• Strong growth was recorded across the board while small businesses and separately business services notably accelerated in April
13#DnBEconBrief
• On a year-over-year basis the overall index rose 8.6 percent, accelerating from the previous month to reach its fastest pace since the report began in December 2010.
• The viability component continued to lift the overall index recording double digit year-over-year growth. In addition to viability the total loss predictor surged in April—signaling extreme risk has improved markedly from a year ago.
U.S. Business Health Index
14#DnBEconBrief
May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Overall Viability Delinquency Total Loss Predictor
Note: Delinquency rates and the Total Loss Predictor are inverted to capture the effects that lower rates will raise the overall score.
Y/Y
Perc
enta
ge C
hg.
What’s happening among small businesses?
15#DnBEconBrief
• Small businesses’ balance sheets are stronger then compared to the past five years, they are improving at an increasing pace and “catching up” to their larger counterparts.
Dec-10Jan
-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11Jul-1
1
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11Jan
-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12Jul-1
2
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12Jan
-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13Jul-1
3
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13Jan
-14
Feb-14
Mar-14
Apr-14
38
40
42
44
46
48
50
52
54
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
(Small Class) Employment < 100 (Primary axis) (Small Class) Employment < 100 (Secondary axis)
Y/Y
Perc
enta
ge C
hg.
0102030
Difference (Overall Business Health Index--Large Companies Minus Small)
Summary
16#DnBEconBrief
• The Small Business Health Index stabilized this month with its value standing at 91.5 points. A stronger bounce back was expected and D&B will continue to examine the tepid improvement
• D&B expects some improvements in the Employment situation with some sectors like Retail picking up pace again
• The Overall Business Health Index continued to gather strength in April. As the U.S. economy continues to heal after the “great recession” business risk continues to move further into a low risk environment.
Follow us on Twitter for up to the minute information and analysis
17
For more information, visit www.dnb.com/tracker
And follow the conversation on Twitter
at @DnBEconomy
#DnBEconBrief