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D&B Analysis | Flat Spot in US Economic Recovery (Fall 2012)

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In this report, D&B confirms a flat spot in US economic recovery for the first half of 2012. Unfortunately, the second half of 2012 is likely to reflect the same.

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D&B Analysis | Flat Spot in US Economic Recovery (Fall 2012)

  1. 1. D&B Analysis Confirms Flat Spotin U.S. Economic RecoveryFall 2012
  2. 2. Most measures of U.S. economic activity showed signs of KEY OBSERVATIONS a significant slowdown during the first half of 2012. This • esitant recovery has stalled across most sectors H economic slowdown is also evident in DB’s propri- and regions etary Current Spend data, which tracks business activity across industries. DB’s Overall Current Spend growth • attern of uneven growth is likely to persist into P contracted by almost 6 percent in the second quarter 2013 2012, a significant decline in relationship to the healthy • he business sector continues to make substan- T growth of almost 7 percent in the final quarter of 2011. tial strides in improving competitiveness, which remains a favorable long-term trend Percent Changes from Previous Quarter 5.0% 12.0% 8.0%The hesitant U.S. recovery continues to face significant 4.0%headwinds and the pace of growth is likely to remain 3.0% 4.0%subdued heading into 2013. DB’s proprietary analysisacross all sectors of the economy confirms that growth 2.0% 0.0%has downshifted substantially, with few areas of the 1.0% -4.0%economy demonstrating momentum. The strugglingrecovery is certainly not good news for U.S. households 0.0% -8.0%due to the limited growth in income and employment, Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12but at the same time there remains evidence that the Gross Domestic Productrecovery will continue. In addition, there are a number Current Spend: Overallof favorable developments occurring below the surface Source: Bureau of Economic Analysis and DB Proprietary Spend Datathat bode well for the economy once top-line growthresumes. This erosion of current spend is noticeable not only for the overall economy, but in most significant sectors of Q3 2010 2010 2011 2011 2011 2011 2012 2012 Q4 Q1 Q2 Q3 Q4 Q1 Q2Percent Changes from Previous Quarter the economy. For instance, the Manufacturing sector experienced a downturn in the growth rate of Current3.0% 15.0% Spend, where growth rates fell from 3.35 percent in the2.5% 10.0% first quarter to a dismal -5.57 percent during the second2.0% quarter of 2012. This trend in Manufacturing Spend is 5.0% confirmed by the Industrial Production Index for Manu-1.5% 0.0% facturing, whose growth rate shows the same pattern—1.0% falling from 2.44 percent to 0.41 percent from the first to -5.0% the second quarter of 2012.0.5%0.0% -10.0% Another important sector of the economy where the Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 downswing is apparent is Automotive. Current spend Industrial Product Index: Manufacturing growth rates saw declines in both quarters of 2012 Current Spending: Manufacturing compared to the last quarter of 2011. This trend, again,Source: Board of Governors of the Federal Reserve System and is confirmed by the macroeconomic indicator, PersonalDB Proprietary Spend Data Consumption Expenditure for Motor Vehicles and Parts, Q2 2010 2010 2010 2011 2011 2011 2011 2012 2012 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2
  3. 3. although with a one-quarter delay. This indicator showsthe same pattern with an increase in growth rate (13percent) in the first quarter of 2012 only to see thedownturn in the second quarter (10.6 percent).Beyond Manufacturing and Automotive, other sectorsconfirm broad-based erosion in activity in the secondquarter of 2012 including Real Estate and Telecommuni-cations (Table in Appendix). The flat spot in growth hasimpacted firms irrespective of size and geography (Tablein Appendix). A snapshot of Current Spend by Geogra-phy shows the worsening in the first quarter of 2012and most regions continue to register negative growthrates in the second quarter. Firms in the regions of NewEngland and Pacific show the lowest spend growth ratesin the second quarter of 2012 and the regions of WestNorth Central and West South Central have the highest.The West North Central is the only region that shows apositive growth rate during the quarter.Unfortunately, this pattern of growth in fits and startshas been a primary characteristic of the current recov-ery. Based on DB’s proprietary analysis, we continue to So against this lingering gloom is there any reason to beexpect more of the same heading into the final months optimistic? The answer, based on our proprietary analy-of the year. The recovery faces a number of structural sis, remains yes, albeit cautiously optimistic. As DB hasburdens that are complicated by key policy issues in- indicated previously, below the surface there are a num-cluding fiscal policy issues across the developed world. ber of very favorable developments occurring, including substantial improvement in the financial health of the business sector in the U.S. Performance Percent Changes from Previous Quarter data for second quarter confirms 40.0% 12.0% that this pattern of improve- ment is continuing and by some 20.0% 8.0% measures gaining momentum. DB’s proprietary measures of 0.0% 4.0% delinquencies (percent of dollars 61+ and 91+ days past due) show -20.0% 0.0% a continuous declining trend for the overall economy, with -40.0% -4.0% significant declines in the second Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 quarter of 2011. A look at the Personal Consumption Expenditure: Motor Vehicles and Parts percent dollars 91+ days past due Current Spend: Automotive (one quarter prior) for major industries presents the Source: Bureau of Economic Analysis and DB Proprietary Spend Data same bright picture. Delinquen- 3 Q3 2010 2010 2011 2011 2011 2011 2012 2012 Q4 Q1 Q2 Q3 Q4 Q1 Q2
  4. 4. cies continue to improve for all major industries since in Appendix). For both views, for all regions and sizethe final quarter of 2011 (Table in Appendix). Wholesale classes, delinquencies have been on the decline sinceTrade is the sector that registers the lowest percent of the final quarter of 2011. Not surprisingly, the firms indelinquent dollars in the second quarter of 2011, while the lowest size class (1-9 employees) have the highestReal Estate registers the highest. The Real Estate sector percent of delinquent dollars 91+ days past due, whilestill seems to be reeling from its recession blows. the largest firms (500+ employees) have the lowest. Fi- nally, by region, the firms in the Mountain region projectThe same improvement is seen when delinquencies are the highest delinquencies and those in the West Northstudied by geography and employee size class (Tables Central region project the lowest. The falling delinquen- cies may be a sign that businesses are continuing to grow at a slow pace despite the slowdown in Deliquency Trend: Overall the economy. 8.0% From DB’s perspective the latest flat spot in 7.0% the U.S. recovery is broad-based and disappoint- 6.0% ing. Unfortunately, the second half of 2012 is likely to reflect more of the same. The structural 5.0% impediments to growth remain substantial, and 4.0% the pattern of growth in fits and starts is likely to persist. While this pattern of growth is disap- 3.0% pointing, there remain bright spots that bode Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 10 10 10 11 11 11 11 12 12 well for the long-term including the substantial Percent Dollars 91+ DPD improvement in the financial health of the busi- Percent Dollars 61+ DPD ness sector. Not all is lost, despite the fact that Source: DB Proprietary Delinquency Data some days it may seem that way. 4
  5. 5. AppendixTable: Spend Growth Rates by Major Industries (Percent Changes from Last Quarter)Quarter Construction Financial Insurance Real Retail Business Personal Telecommunications Wholesale Services Estate Trade Services Services TradeQ2 2010 22.82% 3.81% 67.22% 4.42% 4.37% 5.21% 6.07% -3.53% 14.37%Q3 2010 5.70% 12.82% 6.81% 7.71% 3.71% 5.54% 5.42% 11.16% -0.86%Q4 2010 -8.67% 0.74% -26.73% -4.08% 12.18% 1.71% -0.71% -6.45% -0.34%Q1 2011 -4.41% 0.04% -18.54% -0.61% -9.60% -1.41% -2.48% -14.03% -3.32%Q2 2011 19.36% 3.02% -2.69% 3.56% 7.07% 7.59% 7.37% 3.75% 11.52%Q3 2011 7.75% 6.46% 4.04% 6.58% 13.06% 5.18% 3.11% -2.31% 1.25%Q4 2011 -7.25% 6.11% 6.71% -3.13% 12.65% 3.79% 3.86% 20.94% 2.15%Q1 2012 -16.68% -12.57% -13.73% -12.03% -14.18% -16.24% -15.19% 12.87% -5.28%Q2 2012 7.43% 1.57% -7.06% -13.54% -3.49% -8.74% -4.93% -1.73% 2.32%Table: Spend Growth Rates by Employee Size Class (Percent Changes from Last Quarter)Quarter 1-9 10-49 50-99 100-499 500+Q2 2010 11.26% 12.16% 10.23% 11.30% 10.81%Q3 2010 7.19% 2.33% 7.02% 1.75% 3.03%Q4 2010 -8.41% -2.96% 0.77% -0.89% 2.55%Q1 2011 -4.18% 3.01% -2.39% 3.20% -4.43%Q2 2011 11.21% 8.07% 0.55% 7.56% 9.36%Q3 2011 0.81% 4.82% 3.46% 2.44% 4.93%Q4 2011 -0.77% 0.23% -1.71% 2.51% 8.49%Q1 2012 -22.00% -6.45% -3.37% -4.33% -8.86%Q2 2012 -8.96% -1.93% 4.54% 0.52% -0.67%Table: Spend Growth Rates by Region (Percent Changes from Last Quarter)Quarter New E. North E. South Mid- Mountain Pacific South W. North W. South England Central Central Atlantic Atlantic Central CentralQ2 2010 6.39% 10.62% 9.86% 7.82% 9.55% 12.36% 11.08% 10.38% 10.02%Q3 2010 7.54% 2.86% -1.05% 5.64% 1.94% 4.64% 13.19% -4.86% 5.07%Q4 2010 1.30% 1.44% -4.27% -0.05% -1.37% -4.18% 5.22% 0.81% 0.67% Q1 2011 -2.95% -2.59% -2.72% -1.18% -2.74% -1.62% -1.79% 0.91% -0.68% Q2 2011 1.27% 8.16% 7.35% 3.49% 7.27% 12.25% 9.49% 10.88% 8.43% Q3 2011 7.95% 4.19% 1.05% 5.40% 2.71% 1.82% 3.88% -2.54% 6.96% Q4 2011 5.76% 3.33% -1.12% 2.12% 5.77% 1.68% 3.88% 4.57% 5.82% Q1 2012 -12.19% -7.12% -0.33% -11.27% -8.80% -9.92% -11.62% -4.69% -6.93% Q2 2012 -7.41% -0.16% -1.38% -1.68% -0.93% -6.09% -4.96% 3.41% -0.33% 5
  6. 6. Table: Delinquencies (Percent Dollars 91+ Days Past Due) by Major Industries Quarter Automotive Construction Financial Services Insurance Manufacturing Real Estate Q1 2010 6.09% 9.20% 8.93% 9.45% 2.72% 12.43% Q2 2010 5.16% 8.79% 9.09% 7.64% 2.40% 12.93% Q3 2010 5.57% 10.39% 10.02% 7.72% 2.46% 14.18% Q4 2010 5.23% 10.77% 9.91% 10.26% 2.61% 14.20% Q1 2011 4.32% 10.34% 8.68% 9.70% 2.30% 13.34% Q2 2011 4.28% 10.05% 8.60% 9.37% 2.25% 14.64% Q3 2011 4.71% 10.32% 7.67% 9.59% 2.28% 13.65% Q4 2011 4.55% 9.49% 5.87% 8.11% 2.08% 12.14% Q1 2012 4.35% 8.26% 5.24% 7.43% 1.71% 10.25% Q2 2012 3.64% 6.43% 3.87% 5.83% 1.36% 8.71% Quarter Retail Trade Business Services Personal Services Telecommunications Wholesale Trade Q1 2010 5.14% 7.78% 8.39% 4.12% 2.05% Q2 2010 5.22% 7.79% 8.60% 4.57% 1.86% Q3 2010 5.87% 9.53% 9.56% 4.94% 2.18% Q4 2010 5.47% 9.56% 10.16% 6.15% 2.29% Q1 2011 5.26% 8.51% 9.58% 4.42% 2.00% Q2 2011 5.57% 8.53% 9.09% 5.30% 1.83% Q3 2011 5.04% 8.41% 9.19% 5.52% 1.79% Q4 2011 4.44% 7.25% 8.70% 4.57% 1.61% Q1 2012 4.22% 6.30% 8.02% 2.84% 1.42% Q2 2012 3.40% 5.16% 6.78% 1.83% 1.02%Table: Delinquencies (Percent Dollars 91+ Days Past Due) by Employee Size Class Quarter 1-9 10-49 50-99 100-499 500+ Q1 2010 11.93% 6.98% 3.26% 1.54% 0.82% Q2 2010 11.82% 6.82% 3.07% 1.50% 0.58% Q3 2010 14.45% 7.37% 2.92% 1.57% 0.55% Q4 2010 14.73% 7.79% 3.13% 1.76% 0.65% Q1 2011 13.68% 7.00% 3.09% 1.66% 0.73% Q2 2011 13.80% 6.54% 2.77% 1.37% 0.82% Q3 2011 14.08% 6.36% 2.64% 1.39% 0.73% Q4 2011 12.63% 6.08% 2.62% 1.28% 0.54% Q1 2012 11.42% 5.33% 2.20% 1.02% 0.33%Q2 2012 9.26% 4.58% 1.78% 0.83% 0.17% 6
  7. 7. Table: Delinquencies (Percent Dollars 91+ Days Past Due) by Region Quarter New E. North E. South Mid- Mountain Pacific South W. North W. South England Central Central Atlantic Atlantic Central Central Q1 2010 4.51% 3.76% 4.33% 5.20% 10.81% 7.46% 6.26% 3.78% 3.66% Q2 2010 4.57% 3.67% 4.21% 5.21% 9.96% 7.16% 6.10% 3.66% 3.59% Q3 2010 5.08% 4.31% 4.93% 5.78% 11.24% 8.11% 6.72% 4.59% 4.09% Q4 2010 4.66% 4.35% 5.14% 5.72% 11.78% 8.26% 6.92% 4.53% 4.00% Q1 2011 4.23% 4.19% 4.26% 5.42% 11.19% 7.56% 5.91% 4.02% 3.91% Q2 2011 4.44% 4.39% 3.74% 5.17% 11.21% 7.50% 5.64% 3.82% 3.75% Q3 2011 4.32% 4.42% 3.93% 5.35% 10.54% 7.21% 5.56% 3.85% 3.49% Q4 2011 3.78% 3.90% 3.70% 4.96% 9.49% 6.53% 5.02% 3.42% 3.09% Q1 2012 3.50% 3.14% 3.09% 4.54% 8.43% 5.93% 4.60% 2.90% 2.66% Q2 2012 2.72% 2.69% 2.34% 3.53% 7.21% 4.67% 3.81% 2.16% 2.04% Q4 2011 3.78% 3.90% 3.70% 4.96% 9.49% 6.53% 5.02% 3.42% 3.09% Q1 2012 3.50% 3.14% 3.09% 4.54% 8.43% 5.93% 4.60% 2.90% 2.66% Q2 2012 2.72% 2.69% 2.34% 3.53% 7.21% 4.67% 3.81% 2.16% 2.04%Dun Bradstreet is the world’s leading source of commercial information and insight on businesses, enabling companies to Decide with Confidence®for over 170 years. DB’s global commercial database contains more than 210 million business records, enhanced by our proprietary DUNSRight®Quality Process, providing our customers with quality business information. This quality information is the foundation of our global solutions thatcustomers rely on to make critical business decisions.© Dun Bradstreet, Inc. 2012. All rights reserved. (DB-3357) 7

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