WAIN Street Business Default Index shows credit quality held steady during the quarter but raises concerns about the near future

Business Default Index improves for the quarter but slips in last two months
Business Default Diffusion Index deteriorates in last two months

WAIN Street reported Thursday that the Business Default Index value for Q3 2013 was 6.11%—an improvement of 0.14% over Q2 2013.  The index is quoted as a seasonally adjusted, annualized default rate.  An increase in the index corresponds to deterioration in credit quality.  Monthly performance during the quarter was uneven with the index deteriorating in the last two months.  The September diffusion value of 54.1 raises red flags about the near future.  The diffusion value corresponds to a margin of 8.2%—in September 8.2% more businesses deteriorated in credit quality than improved.

Vidur Dhanda, Publisher, WAIN Street, said Thursday, “The improvement in quarterly default rates is encouraging and consistent with the overall slow growth.  However, the Diffusion Index paints a more cautious picture of the challenging, uneven environment confronting businesses.   Businesses face strong headwinds as consumers respond to the uncertain environment.”

Highlights from the Q3 2013 report:

  • GA and WI businesses lead the nation in quarterly credit quality improvements
  • CT businesses suffered sharp deterioration in credit quality
  • NV and AZ business default rate more than double national rate
  • Construction sector default rate 1.5% higher than national rate
  • Consumer and business services sectors improved in credit quality during Q3 2013

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.