The Small Business sector continues to slow and may have stalled. All sectors have been impacted, with the Automotive Index registering the largest decline. Financial pressure may be increasing as components have weakened, including the previously favorable rate of small business failures.

1. Small Business Health Index
September 2012
Behavior of the Sub-components
All sub-components of the Index declined during the
current month, confirming the broad-based sluggish-
ness. The Credit Card Utilization Index, the earliest one
to pick up the slant, has registered a decline for the
third consecutive month. The only sectors to register
an increase in this sub-component are Retail Trade and
Transportation. The value of this sub-component of
the overall index continued to move in an unfavorable
direction at 77.41 in July 2012. This implies that the
outlook for access to credit for small businesses remains
restrained in most sectors of the economy.
The Card Delinquency 61+ Days Past Due Index shows
a one-point decline for the overall economy, standing
at 47.72. All sectors, without any exceptions, show a
decline in this sub-component in July 2012. On a posi-
tive note, the percent of cards 61+ days past due for the
overall economy has increased by roughly 4 percent
D&B Key Observations
since the beginning of the second quarter of 2012.
• he Small Business sector continues to slow
T The overall declining trend continues with the Percent
and may have stalled. Dollars 91+ Days Past Due Index. In July the index stands
• All sectors have been impacted, with the
at 103.63, a slight decline compared to June. The percent
Automotive Index registering the largest of delinquent dollars 91+ days past due for the overall
decline. economy has decreased by roughly 2 percent in July
2012 since the beginning of the second quarter of 2012.
• Financial pressure may be increasing as
components have weakened, including
the previously favorable rate of small
business failures. Small Business Health Index: Overall (Dec 2004=100)
120
Dun Bradstreet’s monthly composite Small Business
Health Index through July 2012 continues on the down- 100
ward path that started last month. The value of the
index stood at 95.73 in July, which is a two-point decline
80
compared to last month. Most troubling is that all sec-
tors have now contributed to the decline, as compared
to only a few sectors previously. The Automotive Index 60
shows the highest percentage decline (-7.53 %) during
July 2012 while the Manufacturing sector shows the 40
Dec 04
Q3 05
Q2 06
Q1 07
Q4 07
Q3 08
Q2 09
Q1 10
Q4 10
Q3 11
Feb 12
May 12
lowest (-0.28 %). The Small Business Health Index is
in-line with other macroeconomic indicators and
provides confirmation that this vital sector of the U.S.
economy is going through its own version of a flat spot. DB Proprietary Small Business Health Index, September 2012

2. The Failure Ratio sub-component, which has been a SBHI Methodology
bright spot on the rise since the beginning of 2012, has
The Small Business Health Index is based on 4 parts:
fallen for the first time this year for the overall economy
• Average Credit Card Utilization
and all its sectors. This is troubling as it indicates that
the number of small business failures has increased. For • ercent of Credit Cards with outstanding balance cycle
P
the overall economy, this component had undergone a 3+ (61+ Days Past Due)
9-point decline in a single month, standing at 154.17 in • atio number of failures in the last 12 months over
R
July compared to 163.22 in June. The slowdown in the prior 12 months
overall U.S. economy seems to be finally affecting the
• ercent of delinquent dollars 91+ Days Past Due out
P
stability of small businesses.
of all outstanding balances
At Dun Bradstreet, we are uniquely positioned and
The index is created by following a stratified sample
have an obligation to provide our customers and the
of all small active businesses (excluding branches) with
business community with relevant insight about the
total number of employees 100. The samples have
economy. We have utilized our rich data to create a
the same representation by Business Age, Number of
measure of small business health as is reflected in their
Employees, Industry, and Payment experiences. Sample
payment patterns, failure rates, and utilization on credit.
for each period contain ~10MM small businesses.
Our simple index is a combination of pro-cyclical and
counter-cyclical elements—reflected in one number. The Index value for each of the 4 parts as of December
We are using 2004 as the base year. The index is a 2004 was considered as 100.
measurement of small business health relative to 2004. If Index in any of the following periods is higher than
The index should provide the user a quick but compre- 100—it means improvement in specific metric. It
hensive view of the health of small businesses. happens when value of the attribute decreases as all
The index is published monthly. 4 characteristics positively correlate with higher risk.
For more information, please visit www.dnb.com.
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