It’s Better in the South

The South is now the country’s most populous region and its largest economic area.  Nearly two out of five Americans live in the South and the region accounts for 51 percent of the nation’s population growth since 2010.

Whether the South is home to the best states for business; an ascendant manufacturing hub;  a vibrant and growing result of conscious policy; an emerging economic engine; or in a race to the bottom fueled by shortsighted policies, lax environmental regulations and even weaker worker rights is not our concern here.  At WAIN Street, we are concerned with the credit markets and helping them better serve middle-market and small business enterprises.  And to that end, we present here a Just the facts, ma’am analysis of the South based on our Business Default Index.

The default rate of southern businesses has been better than the national rate since mid-2011 and has been the lowest of all regions since the end of 2012.

Figure 1: Monthly default rates for the WAIN Street Business Default Index (BDX) and census region-based sub-indices.

The superior credit performance is across businesses of all sizes.

Figure 2: Three month moving average default rate by business size.

Sub-index definitions


Businesses without paid employees


Businesses with 1 to 19 employees


Businesses with 20 to 99 employees


Businesses with 100 or more employees

Except for Utilities and Mining industry sectors, southern businesses have better credit quality in all industry sectors.  Manufacturing and Educational services industry sectors present standout performance.
Figure 3: Three month moving average default rate by industry sector. The sectors are sorted in increasing relative performance order.

Across the region, business credit quality varies substantially between states.  TX and DC businesses perform worse than the overall national default rate and LA, VA and AR business credit quality is the best in the region.  LA default rate is over 4% lower than the national default rate.

Figure 4: Three month moving average default rate for southern states. Sates are sorted in increasing default rate order.