D&B US Economic Health Briefing (April 1, 2014)
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D&B US Economic Health Briefing (April 1, 2014)

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The Small Business Health Index erode further during the current month and has prompted D&B to become a bit more cautious on the economic outlook. Abnormally poor weather remains a factor and ...

The Small Business Health Index erode further during the current month and has prompted D&B to become a bit more cautious on the economic outlook. Abnormally poor weather remains a factor and therefore Q2 readings will provide a better assessment of the underlying strength of the recovery. Employment growth is expected to continue to rebound in March with payroll employment growth of close to 200,000. The Business Health Tracker remains at record levels and is up 5% y-o-y reflecting once again the strong balance sheet health of the private sector.

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D&B US Economic Health Briefing (April 1, 2014) Presentation Transcript

  • 1. Paul Ballew, Chief Data & Analytic Officer, D&B Tuesday, April 1, 2014 – 8:30AM Economic Briefing Follow us on Twitter #DnBEconomy #DnBEconBrief
  • 2. Overview • The Small Business Health Index erode further during the current month and has prompted D&B to become a bit more cautious on the economic outlook. • Abnormally poor weather remains a factor and therefore Q2 readings will provide a better assessment of the underlying strength of the recovery. • Employment growth is expected to continue to rebound in March with payroll employment growth of close to 200,000 • The Business Health Tracker remains at record levels and is up 5% y-o-y reflecting once again the strong balance sheet health of the private sector. 2#DnBEconBrief
  • 3. The economy is still reeling from short term factors that caused a slowdown in the recent months 84.0 88.0 92.0 96.0 100.0 104.0 52.0 54.0 56.0 58.0 60.0 SBHI shows Slowdown in Business Activity Small Business Health Index: Overall (right) ISM Nonmanufacturing Business Activity Index: 3-month Moving Avg.(Left) 3 • The drop in the SBHI signals the economy is still recovering from the long harsh winter • The weather has started improving but the drag that it has left on the economy remains #DnBEconBrief
  • 4. On a more positive note the improvement in small business health over the last two years has become more pervasive across verticals 6.00 6.50 7.00 7.50 8.00 8.50 9.00 9.50 Standard Deviation of SBHI by Vertical • There is a steady decrease in the standard deviation of SBHI by vertical which is an indication of correction in the structural imbalance • The imbalance in small business performance by vertical continues to decline and stands at its lowest since January 2013 4#DnBEconBrief
  • 5. By geography, the imbalance seems to be more pronounced 187.8 168.4 139.8 123.4 122.5 0.0 40.0 80.0 120.0 160.0 200.0 Atlanta,GA New Orleans,LA Miami,FL Nashvl-Dvdsn,TN San Antonio,TX Small Business Health Index: Top 5 MSAs 76.9 76.9 77.5 77.8 81.0 0.0 40.0 80.0 120.0 160.0 200.0 Chicago,IL Richmond,VA Salt Lk Cty- Ogden,UT Hartford,CT Phoenix,AZ Small Business Health Index: Bottom 5 MSAs • There remain large disparities between the highest and the lowest performing MSAs 5#DnBEconBrief
  • 6. … with marked differences in growth patterns 0% 10% 20% 30% 40% 50% 60% 70% 80% 2010 2011 2012 2013 Atlanta, GA MSA: YOY Change in SBHI -15% -5% 5% 15% 25% 2010 2011 2012 2013 Chicago, IL MSA: YOY Change in SBHI • While the leading geographies have taken off growth during the past year, the lagging ones have slowed down 6#DnBEconBrief
  • 7. And unlike performance across industry verticals the dispersion by MSA has partially reversed course 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Standard Deviation of SBHI by MSA • The dispersion between MSAs fell sharply early in the recovery period and has remained stable until early 2013 • The slight increase in dispersion during the past year may be a reflection of the shifting growth patterns among MSAs 7#DnBEconBrief
  • 8. U.S. Jobs Health • Based on the underlying factors, D&B expects Nonfarm payroll employment to improve this month, building on the trend from last month • All sectors are expected to gain, with the notable being Retail and Construction that have been held back by the weather 8#DnBEconBrief
  • 9. U.S. Business Health Index • The overall US Business Health Index slightly increased in March to reach 53.15%. The index recorded its sixth-consecutive sequential increase and its ninth consecutive month above the important 50% “neutral” level. • Again, this was the highest level recorded since the inception of the index in December 2010 9#DnBEconBrief
  • 10. • On a year-over-year basis the overall index increased 5.0 percentage points, a slightly lower growth rate compared to the previous two months. • All three components increased on a 12-month basis in March. The Viability component continued to record double digit year-over-year growth albeit at a slower pace. -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Y/YPercentageChg. Note: Delinquency rates and the Total Loss Predictor are inverted to capture the effects that lower rates will raise the overall score. Overall Viability Delinquency Total Loss Predictor U.S. Business Health Index 10#DnBEconBrief
  • 11. 20 25 30 35 40 45 50 55 Variance by industry 100 150 200 250 300 350 400 450 Dec-… Mar-… Jun-11 Sep-… Dec-… Mar-… Jun-12 Sep-… Dec-… Mar-… Jun-13 Sep-… Dec-… Mar-… Variance by employment size 2 3 4 5 6 7 8 9 10 Dec-… Mar-… Jun-11 Sep-… Dec-… Mar-… Jun-12 Sep-… Dec-… Mar-… Jun-13 Sep-… Dec-… Mar-… Variance by geography The virtuous cycle continues—Variance among all components in the Overall Business Health Index is dropping 11#DnBEconBrief
  • 12. 47 48 49 50 51 52 53 54 55 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Retail--Business Health Index (3-month moving average) Hard hit sectors like retail have made significant progress over the last year despite the lack of robust consumer spending growth 12#DnBEconBrief
  • 13. 400 500 600 700 800 900 1000 1100 1200 Source: U.S. Census Bureau New Private Housing Units Authorized by Building Permit (SAAR, Thous.Units) Housing Starts (SAAR, Thous.Units) 46 47 48 49 50 51 52 53 54 55 56 57 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Real Estate Real estate firms are also well positioned even as the moderate recovery in housing has stalled a bit 13#DnBEconBrief
  • 14. • Despite a drop in the SBHI that has been remarkably stable for several months D&B continues to project growth of close to 3%. The drop does warrant attention and clearer readings in Q2 have become very important • On a positive note industries that have lagged the recovery are experiencing improvement and are poised to benefit from an acceleration in economic growth • Correction of structural imbalances is the pre-requisite for sustained growth and it seems the economy has started on this journey • US businesses continued to broadly strengthen their balance sheet health in March. The Business Health Index reiterates the same story: many lagging industries and regions are performing at an improved pace and are “catching up” to their comparable counterparts. Summary 14#DnBEconBrief
  • 15. Follow us on Twitter for up to the minute information and analysis 15 For more information, visit www.dnb.com/tracker And follow the conversation on Twitter at @DnBEconomy #DnBEconBrief