Based on proprietary data and analytic insight, this report gives Dun & Bradstreet's perspective on gloal business conditions for the first half of 2012.

1. D&B’s Economic
Outlook—Mid Year
Summer 2012

2. T his mid-year economic update leverages D&B’s proprietary data and analytic
insight to bring you our perspective on global business conditions.
Our commitment is to help you make the most informed business decisions.
While growth is top-of-mind at
most businesses, D&B projects KEY OBSERVATIONS
that the U.S. and global econo- • B’s revised economic outlook for 2012 and 2013
D
mies will slog through the has been downgraded.
second half avoiding a replay of
• he Global economy is still poised to avoid a
T
2008–2009, but still short of the
secondary economic contraction, although fiscal
kind of growth surge we’re all
issues could derail progress.
looking forward to.
• he outlook for Europe remains troubling with the
T
Growth is projected to remain probability of a partial dissolution of the Euro in
subdued and uneven at less excess of 50%.
Paul Ballew than 3%. The Euro Zone is
Dun Bradstreet • ggressive restructuring by the business sector is
A
expected to continue to slide
Chief Economist the rainbow emerging from the turbulence of the
into recession due to the ongo-
BallewP@DNB.com last five years.
ing crisis, but the contraction
may be offset by modest growth in the U.S. and an
aggressive stimulus program in China. Real GDP Growth (%): Advanced and Emerging Economies
We expect growth in the US of just over 2 percent and 2011 2012f 2013f
growth in China of just over 7 percent. The pace of World 2.7 2.3 2.7
growth is below trend, but DB continues to believe Advanced Economies 1.6 1.3 1.7
that given structural imbalances in the two largest US 2.1 2.3 2.2
economies remain widespread, this pace of growth is Euroland 1.5 -0.5 0.7
what we should expect. Japan -0.8 2.0 1.8
UK 0.7 0.4 1.0
In the Euro Zone
Emerging Economies 5.4 5.0 5.5
DB continues to assume that the Euro Zone will
Brazil 2.7 3.9 4.5
stagger through the second half of the year as a mon-
Russia 4.5 3.9 3.6
etary union. We continue to forecast that the Zone will
India 6.3 6.5 6.7
eventually break apart through the exit of Greece (pos-
China 9.2 7.5 8.1
sibly other southern economies) and this exit remains a
significant risk to the global recovery. The likelihood of Note: Columns 2012 and 2013 (indicated with with a ‘f’ subscript) are forecasts.
dissolution in 2012 remains modest due to the efforts of
the ECB, IMF and EFSF, but given the fundamental flaws
strong evidence that non-financial institutions are in
in the design dissolution is probable in 2013/2015.
better shape to weather any economic storm than they
In the United States were in 2008. The last five years have been a period of re-
On a positive note, DB’s proprietary analysis on the structuring for many sectors and companies are leaner,
health of U.S. and global businesses continues to provide meaner and more flexible.
2

3. Our small business health index has improved by over Housing
20 points since the trough. Key sectors like manufac-
Even sectors at the epicentre of the economic contrac-
turing are at pre-recession lows for bankruptcies and
tion are demonstrating improvement. The DB Small
delinquencies and even fragile sectors like housing are
Business Health Index for the two major components of
posting modest gains on key indicators.
the Housing industry, namely Construction and Real
These gains are especially notable in the world’s larg- Estate, show a meandering upswing starting the first
est economy. U.S. failures and bankruptcies (Tables in quarter of 2010, signifying revival of small businesses in
Appendix 1) showed an alarming increase in both in both of the sub-sectors. The small businesses in the Real
2010 compared to both 2006 and 2008. However, 2011 Estate sub-sector seem to have been hit harder com-
registers a decline in failures compared to 2008 and pared to their counterparts in the Construction sub-sec-
considerable declines in both failures and bankruptcies tor, but the former have also recovered at a faster pace.
compared to 2010. The declining trend continues into
Small Business Health Index: Construction (Dec 2004=100)
the first quarter of 2012, where latest estimates by DB
120
shows a 17.49 percent decline in bankruptcies and a
29 percent decline in failures compared to March 2011.
Further analysis shows that this decline in failures and 100
bankruptcies between 2010 and 2011 holds in all major
sectors of the U.S. economy. Firms of all size classes 80
distributed by employee groups also show the decline
between 2010 and 2011. 60
Overall Failures and Bankruptcies: 2011 vs. 2012
40
Bankruptcies DB Estimate of business Dec Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Feb Apr
failures 04 05 06 07 07 08 09 10 10 11 12 12
March 2011 53,651 89,968
March 2012 44,267 63,875
%YOY Change -17.49% -29.0% Small Business Health Index: Real Estate (Dec 2004=100)
120
Real-time measures on the stress on businesses also
100
indicate substantial improvement despite the tepid
macro-economic backdrop. Based on DB’s proprietary
80
measure, the percent businesses 91 days delinquent
(Tables in Appendix 1) also shows declines between
April 2010–March 2011 and the same period of the fol- 60
lowing year. As in the case of failures and bankruptcies,
the drop in delinquent businesses is also perceived in 40
firms of all size classes, as well as all major U.S. industry Dec Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Feb Apr
04 05 06 07 07 08 09 10 10 11 12 12
groups. Overall percent dollars 91 days past due have
also dropped from 5.42 percent in March 2011 to 4.8
percent in March 2012—a decline of over 11 percent in
the past year.
3

4. Manufacturing Final Conclusions
A spotlight on the Manufacturing sector presents a more With the business sector doing its part, the challenges
optimistic picture. The DB Small Business Health Index for the U.S. and global recovery resides elsewhere.
for the Manufacturing industry has been on an upswing For 2012 and 2013 the primary threats to the global
since January 2012, and stood at a high 90.61 in April recovery continue to be on two fronts—a) in developed
2012. Failures and bankruptcies show the post-2009 markets fiscal policy issues in the short and long term
decline and have almost dropped to their 2006 levels. A remain challenges that potential will not only derail the
comparison of the manufacturing sector with the rest recovery but inhibit growth throughout the decade and
of the economy in the light of year-on-year changes in b) in developing markets sectoral imbalances are near
failures and bankruptcies reveals that manufacturing term challenges that complicate any efforts to imple-
was hit harder ,but has bounced back valiantly. ment a stimulus package.
It’s a challenging back-end to the year. DB expects a
The DB Small Business Health Index for the
Manufacturing industry has been on an upswing pattern very similar to what we experienced in 2010
since January 2012 and 2011. Lots of concern over a double-dip recession
may persist, but at the end of the day the recovery is
Small Business Health Index: Manufacturing (Dec 2004=100) likely to continue to crawl, stagger, crawl.
120
100
80
60
40
Dec Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Feb Apr
04 05 06 07 07 08 09 10 10 11 12 12
Source: DB Proprietary Data
4

5. Appendix 1: Overall U.S.
Overall Failures and Bankruptcies: 2006–2010
2006 2008 2010 2011
Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies
34190 21821 70663 42085 88122 54859 68932 46025
% YOY Change
2006 va. 2010 2008 vs. 2010 2008 vs. 2011 2010 vs. 2011
Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies
157.74% 151.40% 24.71% 30.35% -2.45% 9.36% 21.78% -16.10%
Failures by Major Industry: 2010–11
Industry Failures 2010 Failures 2011 Percent YOY Change: 2010 vs. 2011
Construction 11899 9565 -19.62%
Finance 3060 2147 -29.84%
Insurance 921 681 -26.06%
Manufacturing 3898 2811 -27.89%
Natural Resources 2811 2274 -19.10%
Business Services 20891 16437 -21.32%
Personal Services 15114 11981 -20.73%
Real Estate 4223 3166 -25.03%
Telecommunications 590 402 -31.86%
Transportation 3776 2755 -27.04%
Utilities 222 170 -23.42%
Wholesale Trade 3628 2967 -18.22%
Retail Trade 13349 9652 -27.69%
Overall 84382 65008 -22.96%
5

6. Bankruptcies by Major Industry: 2010–11
Industry Failures 2010 Failures 2011 Percent YOY Change: 2010 vs. 2011
Construction 8350 6651 -20.35%
Finance 1308 1209 -7.57%
Insurance 395 358 -9.37%
Manufacturing 2205 1636 -25.80%
Natural Resources 2252 1844 -18.12%
Business Services 14508 12136 -16.35%
Personal Services 9751 8302 -14.86%
Real Estate 2815 2189 -22.24%
Telecommunications 222 170 -23.42%
Transportation 2619 1930 -26.31%
Utilities 131 111 -15.27%
Wholesale Trade 1602 1569 -2.06%
Retail Trade 7360 6020 -18.21%
Overall 53518 44125 -17.55%
Failures and Bankruptcies by Employee Groups: 2010–11
Employee Failures 2010 Failures 2011 Percent YOY Bankruptcies Bankruptcies Percent YOY
Group Change: 2010 2011 Change:
2010 vs. 2011 2010 vs. 2011
10 80185 63231 -21.14% 50844 42827 -15.77%
10-49 6966 5158 -25.95% 3516 2985 -15.10%
50-99 1109 829 -25.25% 580 464 -20.00%
100-499 452 400 -11.50% 452 400 -11.50%
500-999 87 55 -36.78% 87 55 -36.78%
1000+ 112 84 -25.00% 112 84 -25.00%
6

7. Percent Dollars 91 Days Past Due
7.0%
5.0%
3.0%
1.0%
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012
Delinquent Businesses by Major Industry: April 2010–March 2012
Apr10 to Mar11 Apr11 to Mar12
Industry Average % Businesses 91+ Days Average % Businesses 91+ Days Percent Change
Delinquent Delinquent
Automotive 18.8% 17.5% -7.0%
Construction 18.7% 18.3% -2.1%
Financial Services 15.1% 13.0% -13.6%
Insurance 12.3% 10.9% -11.2%
Manufacturing 20.0% 18.1% -9.7%
Natural Resources 11.1% 11.1% -0.1%
Real Estate 11.1% 10.1% -8.3%
Retail 16.6% 14.8% -10.8%
Business Services 13.6% 12.2% -10.7%
Other Services 13.6% 12.2% -10.6%
Telecommunications 19.1% 15.9% -16.4%
Transportation 18.3% 16.9% -7.9%
Utilities 14.6% 13.5% -7.2%
Wholesale 18.0% 16.0% -11.1%
Overall 15.1% 13.6% -10.0%
Delinquent Businesses by Employee Groups: April 2010–March 2012
Apr10 to Mar11 Apr11 to Mar12
Industry Average % Businesses 91+ Days Average % Businesses 91+ Days Percent Change
Delinquent Delinquent
1-49 14.3% 13.2% -7.9%
50-99 22.6% 20.8% -7.9%
100-249 29.3% 27.5% -6.3%
250-499 37.2% 35.3% -5.1%
500-999 44.8% 42.6% -5.0%
1000+ 53.9% 52.2% -3.2%
Overall 15.1% 13.6% -10.0%
7

8. Appendix 2: U.S. Sectors—Housing
Percent Failures and Bankruptcies and Housing Starts Delinquency and Establishment Closings: Construction
0.9% 40
11.0% 8.5%
0.7% 30 8.0%
10.0%
7.5%
0.5% 20 9.0%
7.0%
0.3% 10 8.0%
6.5%
0.1% 0 7.0% 6.0%
2006 2007 2008 2009 2010 2011 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Housing Starts (Thousand Units Establisment Closings: Contruction
Total Housing: Failures Percent Dollars 91 Days Past Due: Construction
Total Housing: Bankruptcies
Source for Percent Establishment Closings: Bureau of Labor Statistics, Business
Employment Dynamics Database
Source for Housing Starts: Haver Analytics, Regional Database
DB Proprietary Delinquency Data
DB Proprietary Data on Failures and Bankruptcies
Annual House Price Indices (1991=100): Delinquency in the Troubled States
The Troubled States
24%
350
20%
300
16%
250
200
12%
150 8%
100 4%
2006 2007 2008 2009 2010 2011 Jan Apr Jul Oct Jan Apr Jul Oct
10 10 10 10 11 11 11 11
Housing Price Index: Arizona Housing Price Index: Nevada
Housing Price Index: California Average House Price Index: Percent Dollars 91 Days Past Due: AZ
Housing Price Index: Florida All States Excluding AZ, CA, FL, NV
Percent Dollars 91 Days Past Due: CA
Source for State House Price Indices: FHFA (Federal Housing Finance Agency) Percent Dollars 91 Days Past Due: FL
DB Proprietary Delinquency Data
Percent Dollars 91 Days Past Due: NV
Percent Dollars 91 Days Past Due:
All States excluding AZ, CA, FL, NV
Source for State House Price Indices: FHFA (Federal Housing Finance Agency)
DB Proprietary Delinquency Data
9

9. Appendix 3: U.S. Sectors—Manufacturing
Percent Failures and Bankruptcies: Manufacturing Delinquency: Manufacturing vs. Non-Manufacturing
$550,000 1.0% 5.50%
0.8%
4.50%
$450,000
0.6%
3.50%
0.4%
$350,000
0.2% 2.50%
$250,000 0.0%
Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 1.50%
Jan Apr Jul Oct Jan Apr Jul Oct
Manufacturing Value of Shipments ($M) 10 10 10 10 11 11 11 11
Manufacturing New Orders ($M)
Percent of Dollars 91 DPD: All industries excluding Manufacturing
Percent Failures (Manufacturing)
Percent Bankruptcies (Manufacturing) Percent of Dollars 91 DPD: Manufacturing
Source for Manufacturing Value of Shipments and New Orders: U.S. Census Bureau Source: DB Proprietary Delinquency Data
Economic Indicators, Manufacturing and Trade Inventories and Sales database
DB Proprietary Data on Failures and Bankruptcies
Business Bankruptcies: Manufacturing vs.
Business Failures: Manufacturing vs. Non-Manufacturing Non-Manufacturing
80% 80%
40% 40%
0.9
0.7
0% 0%
0.5
-40% -40%
0.3 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Failures (Manufacturing): %YOY change Bankruptcies (Non-Manufacturing): %YOY change
0.1
Q4 2007 Failures (Non-Manufacturing): %YOY change
Q4 2008 Q4 2009 Q4 2010 Q4 2011 Bankruptcies (Manufacturing): %YOY change
Source: DB Proprietary Business Failure and Bankruptcy Data Source: DB Proprietary Business Failure and Bankruptcy Data
10

10. Appendix 2: U.S. Sectors—Manufacturing
Change in Labor Productivity: Manufacturing vs.
Non-Manufacturing
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
2007 2008 2009 2010 2011
Manufacturing Non-farm Business
Business Non-Financial Corporations
Source for Labor Productivity (Output per Hour) Index (2005=100)
Manufacturing vs. Other Sectors: U.S. Bureau of Labor Statistics,
Labor Productivity and Costs Database
11