WAIN Street Reports Continued Strength of Nationwide Business Credit Quality Improvements

Business Default Index Deteriorates Marginally by 0.04%
Business Default Diffusion Index Improves to 45.02

WAIN Street reported Friday that the Business Default Index closed the month of July at 6.07% —marginally up from June’s reading of 6.03%. The index is quoted as a seasonally adjusted, annualized default rate. An increase in the index corresponds to deterioration in credit quality. The current index reading is comfortably below Q2 2013 and YTD 2013 default rates suggesting continued strength of recent credit quality improvements.

The associated Business Default Diffusion Index that captures the degree to which individual business’ credit quality deteriorates or improves closed at 45.02 corresponding to a margin of 9.95%—in July nearly 10% more businesses had an improvement in credit quality than had a deterioration.

From an industry sector perspective, index numbers mirror the impact of strong consumer spending and overall improvement in the financial activities sector. Geographically, Southern and “Heartland” businesses continue to lead the nation in credit quality improvements.

Vidur Dhanda, Publisher, WAIN Street, said Friday, “July 2013 brought a mixed bag of news about the economy—on the encouraging side was acceleration in consumer spending, increase in retail sales, improvements in housing and uptick in small business optimism; industrial production was flat; employment and wage numbers were disappointing; and consumer confidence declined. July data once again reinforces the need for a broad-based, high resolution view of businesses through multiple lenses. Analysis based on small sample sizes, data from just one source or single indicators cannot untangle the credit health of nearly 30 million US businesses.”

The WAIN Street Business Default Index is computed monthly based on the credit performance of nearly 18 million US businesses that have been tracked by WAIN Street for over 12 months. WAIN Street’s newsletter, Taking the Pulse, helps readers peel back the layers and zoom into the nuances and variations in business credit quality.