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D&B US Economic Health Briefing (June 3, 2014)

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This presentation highlights the findings of D&B's US Economic Health Tracker (June edition).

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D&B US Economic Health Briefing (June 3, 2014)

  1. 1. Economic Briefing D&B’s Monthly Presented by Paul Ballew, D&B Chief Data & Analytics Officer and Chief Economist Tuesday, June 3, 2014 – 11:30 AM Follow us on Twitter @DnBEconomy | #DnBEconBrief
  2. 2. Executive Summary  Our June briefing covers the performance of the U.S. economy in the month of May 2014.  The U.S. economic expansion continues to send mixed signals regarding its underlying pace  D&B proprietary metrics also remain conflicted–activity has improved in some areas of the U.S. economy while other measures continue to lag  Measures around small business activity remain the most conflicted and prompt us to downgrade the outlook for 2014  A number of positives remain for the U.S. expansion sufficient to make our downgrade mild. D&B maintains its outlook of cautious optimism as we prepare to step into the second half on 2014 2Follow us on Twitter @DnBEconomy | #DnBEconBrief
  3. 3. The Macro Message at Home Remains Conflicted… 3 Quickening Pace April 2013 Y/Y Change Apr 2014 Y/Y Change Total Nonfarm Payroll (+1.6%) (+1.7%) New Orders (+3.3%) (+7.1%) Industrial Production (+2.6%) (3.4%) Slowing Pace April 2013 Y/Y Change Apr 2014 Y/Y Change Real GDP Growth Q1-2013 (+3.1%) Q1-2014 (+2.0%) Real Retail Sales (+2.53%) (+2.05%) New Home Sales (+27.7%) (-4.2%) Source: Various Statistical Agencies Follow us on Twitter @DnBEconomy | #DnBEconBrief
  4. 4. …GDP Growth has been Lackluster and Uneven Over the Past Five Years… 4 -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Q/QPercentageChg. Source: Bureau of Economic Analysis Real Gross Domestic Product (SAAR, %Chg) Annual Growth Rates 2010 2.51% 2011 1.85% 2012 2.78% 2013 1.88% Follow us on Twitter @DnBEconomy | #DnBEconBrief
  5. 5. …and Headwinds Continue to Disrupt the Global Economy  Softer global economic growth  Geo-political uncertainty  Monetary policy uncertainty  Underlying structural issues (i.e., the labor and housing markets) and productivity growth remain 5 Source: Sergei Grits/Associated PressSource: Reuters Follow us on Twitter @DnBEconomy | #DnBEconBrief
  6. 6. Small Business Health Index  The Small Business Health Index stagnated once again in the most recent reading—projecting economic growth of 2% or less  Most industry indices remain unchanged, reflecting limited acceleration after the subdued first quarter  A number of positives help offset the negative outlook for small business, including improvement in financial health. In addition, supplemental measures like spending and hiring activity offer some support for a second-half acceleration 6Follow us on Twitter @DnBEconomy | #DnBEconBrief
  7. 7. Small Business Health Index: Past Year Trends  Both the overall index and the indices for major industries have remained remarkably stable in the past two months after taking a dip in Feb. 2014 7 70.0 80.0 90.0 100.0 110.0 120.0 Small Business Health Index: Overall and Major Industries Overall Manufacturing Retail Real Estate Business Services Construction Source: D&B Proprietary Data Follow us on Twitter @DnBEconomy | #DnBEconBrief
  8. 8. Other Proprietary Metrics Show Areas of Increased Activity Including Lending… 8 -8.0% -4.0% 0.0% 4.0% 8.0% 12.0% 16.0% 2012 2012 2013 2013 Small Business Loan and Credit Card Accounts: YOY Change Alaska California Texas Wyoming Loans Credit Card Loans Credit Card • Lending activity among small businesses shows continuous improvement overall and within most geographies Source: D&B Proprietary Data Follow us on Twitter @DnBEconomy | #DnBEconBrief $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 Total Balance on All Open Accounts and C&I Loans ($B) C&I Loans: All Commercial Banks (Left) Total Balance on All Open Accounts (Right)
  9. 9. …Employment and Spending • Small Businesses have always been and continue to be a key source of employment generation in the U.S. economy • Small Business spending (past 12 months) picked up pace in the second half of 2013 9 Source: Bureau of Labor Statistics and D&B Proprietary Data 0 2,000 4,000 6,000 8,000 10,000 124,000 128,000 132,000 136,000 140,000 Small Business Job Postings and Nonfarm Payroll Employment Nonfarm Payroll Employment (ths, Left) Job Postings by Small Businesses: All Sectors (ths, Right) 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Small Business: Total Spend in the Past 12 Months Follow us on Twitter @DnBEconomy | #DnBEconBrief
  10. 10. U.S. Jobs Health • D&B proprietary measures indicate 297,000 jobs were added to Non-farm Payrolls • Manufacturing and Business Services continue to show major gains this month • Sluggishness in Housing and Retail is expected in this month’s employment numbers compared to the previous month 10Follow us on Twitter @DnBEconomy | #DnBEconBrief
  11. 11. • The overall U.S. Business Health Index trended higher in May to reach 54.1%. The index recorded its eighth consecutive sequential increase, once again reaching the highest level since the inception of the report in December 2010 • Strong growth in the small business category (less than 100 employees) continued to lift the overall index 11 U.S. Business Health Index Follow us on Twitter @DnBEconomy | #DnBEconBrief
  12. 12. 12 U.S. Business Health Index • On a 12-month basis the overall business health index rose 7.3%, slowing slightly from the prior month • Strong growth in the viability (+15.1% year-over-year) component continued to lift the index. Sequential and year-over-year growth among the total loss predictor and delinquency subcomponents also raised the overall index -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 Apr-14 May-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 Source: D&B Proprietary DataFollow us on Twitter @DnBEconomy | #DnBEconBrief
  13. 13. Business Stability has Significantly Improved…  Overall, the Viability of Businesses in the U.S. has continuously increased throughout the past year 13 30,000 40,000 50,000 60,000 70,000 46 48 50 52 54 56 Viability Index and Number of Business Failures Viability Index (Left) Failures Source: D&B Proprietary Data Follow us on Twitter @DnBEconomy | #DnBEconBrief
  14. 14. 14 …and Small Businesses Continue to Strengthen • Small Businesses are rapidly strengthening their balance sheets and catching up to their larger counterparts as far as stability is concerned 20 30 40 50 60 70 80 90 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 (Large Class )Employment >= 100 (Small Class) Employment < 100 -10% -5% 0% 5% 10% 15% 20% 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 Apr-14 Y/Y%Chg. (Large Class) Employment >= 100 (3-Month Average) (Small Class) Employment < 100 (3-Month Average) Source: D&B Proprietary Data Follow us on Twitter @DnBEconomy | #DnBEconBrief
  15. 15. 15 D&B Proprietary Scores Show a Decline in Severe Risk Low Risk (+2.29%) Med. Risk (+0.60%) High Risk (-2.89%) Low Risk (+1.37%) Med. Risk (+0.70%) High Risk (-2.08%) 25.83% 54.75% 19.42% Total Loss Predictor April 2012 28.13% 55.35% 16.53% April 2014 Delinquency Predictor 32.64% 36.50% 30.86% 34.01% 37.21% 28.78% Viability Score 31.98% 34.65% 33.37% Low Risk (+10.70%) Med. Risk (+2.85%) High Risk (-13.55%) 42.68% 37.50% 19.82% Follow us on Twitter @DnBEconomy | #DnBEconBrief
  16. 16. 16 Summary • The outlook for the U.S. recovery remains mixed. Although we’ve seen improvement in important macroeconomic indicators and proprietary data, the U.S. economy lacks conviction. • Other headwinds, both domestic and international, could disrupt future growth. Mixed Signals from D&B’s Proprietary Indicators: • The Small Business Health Index remains stable for the second consecutive month–delinquency subcomponents show significant gains on a year-over-year basis and new tracking measures provide some grounds for optimism. • U.S. Jobs Health remains at its peak as the economy is expected to create close to 300,000 jobs this month. Some sectors continue to show improvement, while others feature tepid gains. • The U.S. Business Health Index continues to gather strength, reflecting continued balance sheet improvement across the private sector Follow us on Twitter @DnBEconomy | #DnBEconBrief
  17. 17. 17 Follow us on Twitter for D&B’s up-to-the- minute information and analysis For more information, visit www.dnb.com/tracker And follow the conversation on Twitter at @DnBEconomy Follow us on Twitter @DnBEconomy | #DnBEconBrief

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