D&B US Economic Health Tracker (March 2014)
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D&B US Economic Health Tracker (March 2014)

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This report highlights US economic performance via three key indices. The Small Business Health Index measures year-over-year small business performance through equally weighted payment patterns......

This report highlights US economic performance via three key indices. The Small Business Health Index measures year-over-year small business performance through equally weighted payment patterns and credit use. U.S. Jobs Health combines Small Business Health Index industry data with BLS figures to forecast monthly nonfarm payroll employment. The U.S. Business Health Index provides a year-over-year equally weighted average of D&B’s Viability Score, Delinquency Predictor and Total Loss Predictor.

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  • 1. D&B’s U.S. Economic Health Tracker March 2014 Paul Ballew, Chief Data & Analytics Officer, D&B Tuesday, March 4, 2014 – 8:30 a.m. Follow us on Twitter #DnBEconBrief
  • 2. Small Business Health Index • • • In February, Small Business Health Index (SBHI) showed additional softness in the small business sector, signaling some erosion in economic growth Wintry weather had a significant impact on small business performance On a positive note the private sector healing process continues with growing bright spots in the overall health of the small business community 2 #DnBEconBrief
  • 3. Economic slowdown is apparent… • • Key indicators including employment growth have signaled slowing economic activity in the recent months D&B’s SBHI, which remained fairly stable through the second half of 2013, has also declined 2.3% Slowdown in SBHI and Employment Growth 102.0 2.2% 100.0 2.1% 98.0 2.0% 96.0 1.9% 94.0 1.8% 92.0 1.7% 90.0 Small Business Health Index: Overall (6 months prior, right) Nonfarm Private Payroll Employment, %YOY Change (left) 3 #DnBEconBrief
  • 4. …especially in some major industries • D&B’s SBHI for industries and industry-specific indicators also show recent softening 1.50% Decline in Retail Sales 102.0 1.00% 100.0 0.50% 98.0 0.00% 96.0 -0.50% 94.0 -1.00% 92.0 -1.50% 90.0 Small Business Health Index: Retail (4 months prior, right) Total Retail Sales (Percent Change from previous month, left) Source: Haver Analytics and D&B Proprietary Data #DnBEconBrief 4
  • 5. Declines in the Small Business Health Index suggest change in top-line growth outlook • • SBHI leads Real GDP growth by three quarters SBHI values sliding down to the 90s hints at 2 to 2.5 percent real GDP growth in the next few quarters 120.0 Real GDP growth and D&B's SBHI 4.0% 3.0% 110.0 2.0% 100.0 1.0% 90.0 0.0% 80.0 -1.0% -2.0% 70.0 -3.0% 60.0 -4.0% 50.0 -5.0% Small Business Health Index (3 quarters prior, left) Real GDP Growth (YOY, right) 5 #DnBEconBrief
  • 6. Winter storms had an impact • • Heating Degree Days Monthly Total 7000 New York, NY 6000 5000 4000 3000 2000 1000 0 Dec Jan Heating Degree Days measurement uses a 65 degree Fahrenheit base Total Precipitation (inches) for the month An unseasonably cold and snowy 2013-14 winter season affected almost all parts of the country Unusually cold temperatures hit the Northeast and Midwest and snow crippled the Southern states 2500 Atlanta, GA 2000 1500 1000 500 0 Dec Jan - Depicts snowfall during the month Source: National Oceanic and Atmospheric Administration 6 #DnBEconBrief
  • 7. The weather’s impact is clearly seen in the SBHI Industry breakdown… • • • The SBHI declined slightly less than 3 percent in the past two months Manufacturing was the only sector to show improvement The largest decline was primarily driven by weather-sensitive sectors: Retail, Housing, and Transportation Percent Decline in SBHI in recent months: By Industry Retail Real Estate Transportation Construction Business Services Automotive Personal Services 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 7 #DnBEconBrief
  • 8. …and geography • • Regional SBHI analysis shows declines occurring primarily in the Midwest and Northeast, two regions that endured the worst weather The South and West fared moderately better 2.0% 1.0% Percent Change in SBHI in the recent months: By Region 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% Midwest Northeast South West 8 #DnBEconBrief
  • 9. U.S. Jobs Health • • Despite weather-driven Q1 sluggishness, D&B expects non-farm payroll employment to improve this month, albeit more slowly Major gains are expected in Manufacturing, Construction, and Business Services 9 #DnBEconBrief
  • 10. U.S. Business Health Index • The overall US Business Health index improved in February for the fifth-consecutive month—reaching 53.1% • This was the highest level recorded since the inception of the index in December 2010 • Importantly, small business is driving the improvement 10 #DnBEconBrief
  • 11. U.S. Business Health Index • Year-over-year, the overall index increased 5.6 percentage points (pp.) • All three components recorded an increase on a 12-month basis in February; however, the components recorded slower growth across the board compared to the prior month Overall Viability Delinquency Total Loss Predictor 20.0% Y/Y Percentage Chg. 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Note: Delinquency rates and the Total Loss Predictor are inverted to capture the effects that lower rates will raise the overall score. 11 #DnBEconBrief
  • 12. U.S. Business Health Index • A closer look reveals that over the last three months small businesses (total employees < 100) have moved above 50% and into the improvement category • The difference between small and large risk classes has significantly fallen as well. Small businesses are catching up to their larger counterparts (Large Class)Employment >= 100 Difference (Large Minus Small) (Small Class) Employment < 100 The gap is closing 35 80 30 75 70 25 65 20 60 55 15 50 45 10 40 5 12 #DnBEconBrief Feb-14 Dec-13 Oct-13 Aug-13 Jun-13 Apr-13 Feb-13 Dec-12 Oct-12 Aug-12 Jun-12 Apr-12 Feb-12 Dec-11 Oct-11 Aug-11 Jun-11 Apr-11 0 Feb-11 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 30 Dec-10 35
  • 13. U.S. Business Health Index • Viability has recently been a major growth contributor. The rise in the score can be attributed to lower Business Failures—which continue to decline each month Year-over-year change in business failures (3-month average) 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 13 #DnBEconBrief
  • 14. All four regions now reflect improvements in financial and balance sheet health 58 Midwest 56 54 52 Northeast West South 50 48 46 44 42 40 14 #DnBEconBrief
  • 15. Summary • D&B’s Small Business Health Index demonstrated additional erosion this month. However, it is clear that weather has played a factor and D&B will be tracking closely in the months ahead • D&B expects non-farm payroll employment to edge up in February, although the impact of the slowdown (weather or otherwise) will dominate the numbers • Despite tepid performance in the categories above, U.S. Business Health continued its upward climb in February. The financial and balance sheet health of the private sector remains a positive for the U.S. economy 15 #DnBEconBrief