Mid-Year Global Economic Outlook Summer 2012
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Transcript of Mid-Year Global Economic Outlook Summer 2012
D&B’s Economic Outlook—Mid Year Summer 2012
2
This mid-year economic update leverages D&B’s proprietary data and analytic insight to bring you our perspective on global business conditions.
Our commitment is to help you make the most informed business decisions.
While growth is top-of-mind at most businesses, D&B projects that the U.S. and global econo-mies will slog through the second half avoiding a replay of 2008–2009, but still short of the kind of growth surge we’re all looking forward to.
Growth is projected to remain subdued and uneven at less than 3%. The Euro Zone is expected to continue to slide into recession due to the ongo-ing crisis, but the contraction
may be offset by modest growth in the U.S. and an aggressive stimulus program in China.
We expect growth in the US of just over 2 percent and growth in China of just over 7 percent. The pace of growth is below trend, but D&B continues to believe that given structural imbalances in the two largest economies remain widespread, this pace of growth is what we should expect.
In the Euro Zone D&B continues to assume that the Euro Zone will stagger through the second half of the year as a mon-etary union. We continue to forecast that the Zone will eventually break apart through the exit of Greece (pos-sibly other southern economies) and this exit remains a significant risk to the global recovery. The likelihood of dissolution in 2012 remains modest due to the efforts of the ECB, IMF and EFSF, but given the fundamental flaws in the design dissolution is probable in 2013/2015.
In the United States On a positive note, D&B’s proprietary analysis on the health of U.S. and global businesses continues to provide
strong evidence that non-financial institutions are in better shape to weather any economic storm than they were in 2008. The last five years have been a period of re-structuring for many sectors and companies are leaner, meaner and more flexible.
Paul Ballew Dun & Bradstreet Chief Economist
KEY OBSERVATIONS
• D&B’s revised economic outlook for 2012 and 2013 has been downgraded.
• The Global economy is still poised to avoid a secondary economic contraction, although fiscal issues could derail progress.
• The outlook for Europe remains troubling with the probability of a partial dissolution of the Euro in excess of 50%.
• Aggressive restructuring by the business sector is the rainbow emerging from the turbulence of the last five years.
Real GDP Growth (%): Advanced and Emerging Economies
2011 2012f 2013f
World 2.7 2.3 2.7
Advanced Economies 1.6 1.3 1.7
US 2.1 2.3 2.2
Euroland 1.5 -0.5 0.7
Japan -0.8 2.0 1.8
UK 0.7 0.4 1.0
Emerging Economies 5.4 5.0 5.5
Brazil 2.7 3.9 4.5
Russia 4.5 3.9 3.6
India 6.3 6.5 6.7
China 9.2 7.5 8.1
Note: Columns 2012 and 2013 (indicated with with a ‘f’ subscript) are forecasts.
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Our small business health index has improved by over 20 points since the trough. Key sectors like manufac-turing are at pre-recession lows for bankruptcies and delinquencies and even fragile sectors like housing are posting modest gains on key indicators.
These gains are especially notable in the world’s larg-est economy. U.S. failures and bankruptcies (Tables in Appendix 1) showed an alarming increase in both in 2010 compared to both 2006 and 2008. However, 2011 registers a decline in failures compared to 2008 and considerable declines in both failures and bankruptcies compared to 2010. The declining trend continues into the first quarter of 2012, where latest estimates by D&B shows a 17.49 percent decline in bankruptcies and a 29 percent decline in failures compared to March 2011. Further analysis shows that this decline in failures and bankruptcies between 2010 and 2011 holds in all major sectors of the U.S. economy. Firms of all size classes distributed by employee groups also show the decline between 2010 and 2011.
Real-time measures on the stress on businesses also indicate substantial improvement despite the tepid macro-economic backdrop. Based on D&B’s proprietary measure, the percent businesses 91 days delinquent (Tables in Appendix 1) also shows declines between April 2010–March 2011 and the same period of the fol-lowing year. As in the case of failures and bankruptcies, the drop in delinquent businesses is also perceived in firms of all size classes, as well as all major U.S. industry groups. Overall percent dollars 91 days past due have also dropped from 5.42 percent in March 2011 to 4.8 percent in March 2012—a decline of over 11 percent in the past year.
Housing
Even sectors at the epicentre of the economic contrac-tion are demonstrating improvement. The D&B Small Business Health Index for the two major components of the Housing industry, namely Construction and Real Estate, show a meandering upswing starting the first quarter of 2010, signifying revival of small businesses in both of the sub-sectors. The small businesses in the Real Estate sub-sector seem to have been hit harder com-pared to their counterparts in the Construction sub-sec-tor, but the former have also recovered at a faster pace.
Overall Failures and Bankruptcies: 2011 vs. 2012
Bankruptcies D&B Estimate of business failures
March 2011 53,651 89,968
March 2012 44,267 63,875
%YOY Change -17.49% -29.0%
40
60
80
100
120
Feb12
Apr12
Q311
Q410
Q110
Q209
Q308
Q407
Q107
Q206
Q305
Dec04
40
60
80
100
120
Feb12
Apr12
Q311
Q410
Q110
Q209
Q308
Q407
Q107
Q206
Q305
Dec04
Small Business Health Index: Construction (Dec 2004=100)
Small Business Health Index: Real Estate (Dec 2004=100)
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Manufacturing
A spotlight on the Manufacturing sector presents a more optimistic picture. The D&B Small Business Health Index for the Manufacturing industry has been on an upswing since January 2012, and stood at a high 90.61 in April 2012. Failures and bankruptcies show the post-2009 decline and have almost dropped to their 2006 levels. A comparison of the manufacturing sector with the rest of the economy in the light of year-on-year changes in failures and bankruptcies reveals that manufacturing was hit harder ,but has bounced back valiantly.
The D&B Small Business Health Index for the Manufacturing industry has been on an upswing since January 2012
Final Conclusions
With the business sector doing its part, the challenges for the U.S. and global recovery resides elsewhere. For 2012 and 2013 the primary threats to the global recovery continue to be on two fronts—a) in developed markets fiscal policy issues in the short and long term remain challenges that potential will not only derail the recovery but inhibit growth throughout the decade and b) in developing markets sectoral imbalances are near term challenges that complicate any efforts to imple-ment a stimulus package.
It’s a challenging back-end to the year. D&B expects a pattern very similar to what we experienced in 2010 and 2011. Lots of concern over a double-dip recession may persist, but at the end of the day the recovery is likely to continue to crawl, stagger, crawl.
40
60
80
100
120
Feb12
Apr12
Q311
Q410
Q110
Q209
Q308
Q407
Q107
Q206
Q305
Dec04
Small Business Health Index: Manufacturing (Dec 2004=100)
Source: D&B Proprietary Data
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Appendix 1: Overall U.S.
Overall Failures and Bankruptcies: 2006–2010
2006 2008 2010 2011
Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies
34190 21821 70663 42085 88122 54859 68932 46025
% YOY Change
2006 va. 2010 2008 vs. 2010 2008 vs. 2011 2010 vs. 2011
Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies Failures Bankruptcies
157.74% 151.40% 24.71% 30.35% -2.45% 9.36% 21.78% -16.10%
Failures by Major Industry: 2010–11
Industry Failures 2010 Failures 2011 Percent YOY Change: 2010 vs. 2011
Construction 11899 9565 -19.62%
Finance 3060 2147 -29.84%
Insurance 921 681 -26.06%
Manufacturing 3898 2811 -27.89%
Natural Resources 2811 2274 -19.10%
Business Services 20891 16437 -21.32%
Personal Services 15114 11981 -20.73%
Real Estate 4223 3166 -25.03%
Telecommunications 590 402 -31.86%
Transportation 3776 2755 -27.04%
Utilities 222 170 -23.42%
Wholesale Trade 3628 2967 -18.22%
Retail Trade 13349 9652 -27.69%
Overall 84382 65008 -22.96%
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Bankruptcies by Major Industry: 2010–11
Industry Failures 2010 Failures 2011 Percent YOY Change: 2010 vs. 2011
Construction 8350 6651 -20.35%
Finance 1308 1209 -7.57%
Insurance 395 358 -9.37%
Manufacturing 2205 1636 -25.80%
Natural Resources 2252 1844 -18.12%
Business Services 14508 12136 -16.35%
Personal Services 9751 8302 -14.86%
Real Estate 2815 2189 -22.24%
Telecommunications 222 170 -23.42%
Transportation 2619 1930 -26.31%
Utilities 131 111 -15.27%
Wholesale Trade 1602 1569 -2.06%
Retail Trade 7360 6020 -18.21%
Overall 53518 44125 -17.55%
Failures and Bankruptcies by Employee Groups: 2010–11
Employee Group
Failures 2010 Failures 2011 Percent YOY Change:2010 vs. 2011
Bankruptcies2010
Bankruptcies2011
Percent YOY Change:2010 vs. 2011
<10 80185 63231 -21.14% 50844 42827 -15.77%
10-49 6966 5158 -25.95% 3516 2985 -15.10%
50-99 1109 829 -25.25% 580 464 -20.00%
100-499 452 400 -11.50% 452 400 -11.50%
500-999 87 55 -36.78% 87 55 -36.78%
1000+ 112 84 -25.00% 112 84 -25.00%
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Delinquent Businesses by Major Industry: April 2010–March 2012
Apr10 to Mar11 Apr11 to Mar12
Industry Average % Businesses 91+ Days Delinquent
Average % Businesses 91+ Days Delinquent
Percent Change
Automotive 18.8% 17.5% -7.0%
Construction 18.7% 18.3% -2.1%
Financial Services 15.1% 13.0% -13.6%
Insurance 12.3% 10.9% -11.2%
Manufacturing 20.0% 18.1% -9.7%
Natural Resources 11.1% 11.1% -0.1%
Real Estate 11.1% 10.1% -8.3%
Retail 16.6% 14.8% -10.8%
Business Services 13.6% 12.2% -10.7%
Other Services 13.6% 12.2% -10.6%
Telecommunications 19.1% 15.9% -16.4%
Transportation 18.3% 16.9% -7.9%
Utilities 14.6% 13.5% -7.2%
Wholesale 18.0% 16.0% -11.1%
Overall 15.1% 13.6% -10.0%
Delinquent Businesses by Employee Groups: April 2010–March 2012
Apr10 to Mar11 Apr11 to Mar12
Industry Average % Businesses 91+ Days Delinquent
Average % Businesses 91+ Days Delinquent
Percent Change
1-49 14.3% 13.2% -7.9%
50-99 22.6% 20.8% -7.9%
100-249 29.3% 27.5% -6.3%
250-499 37.2% 35.3% -5.1%
500-999 44.8% 42.6% -5.0%
1000+ 53.9% 52.2% -3.2%
Overall 15.1% 13.6% -10.0%
1.0%
3.0%
5.0%
7.0%
Mar2012
Dec2011
Sep2011
Jun2011
Mar2011
Dec2010
Sep2010
Jun2010
Mar2010
Dec2009
Sep2009
Jun2009
Mar2009
Dec2008
Sep2008
Jun2008
Mar2008
Dec2007
Sep2007
Jun2007
Percent Dollars 91 Days Past Due
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Appendix 2: U.S. Sectors—Housing
0
10
20
30
40
Housing Starts (Thousand Units
2011201020092008200720060.1%
0.3%
0.5%
0.7%
0.9%
Total Housing: Failures
Total Housing: Bankruptcies
100
150
200
250
300
350
Average House Price Index:All States Excluding AZ, CA, FL, NV
Housing Price Index: Nevada
Housing Price Index: FloridaHousing Price Index: CaliforniaHousing Price Index: Arizona
2011201020092008200720064%
8%
12%
16%
20%
24%
Percent Dollars 91 Days Past Due: All States excluding AZ, CA, FL, NV
Percent Dollars 91 Days Past Due: NV
Percent Dollars 91 Days Past Due: FL
Percent Dollars 91 Days Past Due: CA
Percent Dollars 91 Days Past Due: AZ
Oct11
Jul11
Apr11
Jan11
Oct10
Jul10
Apr10
Jan10
7.0%
8.0%
9.0%
10.0%
11.0%
Establisment Closings: Contruction
Q3 11Q2 11Q1 11Q4 10Q3 10Q2 10Q1 106.0%
6.5%
7.0%
7.5%
8.0%
8.5%
Percent Dollars 91 Days Past Due: Construction
Source for Housing Starts: Haver Analytics, Regional Database D&B Proprietary Data on Failures and Bankruptcies
Source for State House Price Indices: FHFA (Federal Housing Finance Agency)D&B Proprietary Delinquency Data
Source for State House Price Indices: FHFA (Federal Housing Finance Agency)D&B Proprietary Delinquency Data
Source for Percent Establishment Closings: Bureau of Labor Statistics, Business Employment Dynamics DatabaseD&B Proprietary Delinquency Data
Percent Failures and Bankruptcies and Housing Starts
Annual House Price Indices (1991=100): The Troubled States
Delinquency in the Troubled States
Delinquency and Establishment Closings: Construction
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Appendix 3: U.S. Sectors—Manufacturing
-40%
0%
40%
80%
Failures (Non-Manufacturing): %YOY change
Failures (Manufacturing): %YOY change
20112010200920082007-40%
0%
40%
80%
Bankruptcies (Non-Manufacturing): %YOY change
Bankruptcies (Manufacturing): %YOY change
20112010200920082007
1.50%
2.50%
3.50%
4.50%
5.50%
Percent of Dollars 91 DPD: Manufacturing
Percent of Dollars 91 DPD: All industries excluding Manufacturing
Oct11
Jul11
Apr11
Jan11
Oct10
Jul10
Apr10
Jan10
Source for Manufacturing Value of Shipments and New Orders: U.S. Census Bureau Economic Indicators, Manufacturing and Trade Inventories and Sales database D&B Proprietary Data on Failures and Bankruptcies
Source: D&B Proprietary Business Failure and Bankruptcy Data
Source: D&B Proprietary Delinquency Data
Source: D&B Proprietary Business Failure and Bankruptcy Data
Percent Failures and Bankruptcies: Manufacturing
Business Failures: Manufacturing vs. Non-ManufacturingBusiness Bankruptcies: Manufacturing vs. Non-Manufacturing
Delinquency: Manufacturing vs. Non-Manufacturing
$250,000
$350,000
$450,000
$550,000
Manufacturing New Orders ($M)
Manufacturing Value of Shipments ($M)
Q4 2011Q4 2010Q4 2009Q4 2008Q4 20070.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Percent Failures (Manufacturing)
0.1
0.3
0.5
0.7
0.9
Percent Bankruptcies (Manufacturing)
Q4 2011Q4 2010Q4 2009Q4 2008Q4 2007
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Appendix 2: U.S. Sectors—Manufacturing
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Non-Financial CorporationsNon-farm Business
BusinessManufacturing
20112010200920082007
Source for Labor Productivity (Output per Hour) Index (2005=100) Manufacturing vs. Other Sectors: U.S. Bureau of Labor Statistics, Labor Productivity and Costs Database
Change in Labor Productivity: Manufacturing vs. Non-Manufacturing