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.

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.
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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
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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)
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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
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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)
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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
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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%
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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
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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
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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
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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.
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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
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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%
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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
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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
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