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. 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. 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. …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. …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. 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. 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. 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. …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. 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. • 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
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. 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
…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
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
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
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