Econintersect: WAIN Street reported the Business Default Index value for October 2013 was 6.06% – a month-over-month improvement of 0.06%. The index is quoted as a seasonally adjusted, annualized default rate. An increase in the index corresponds to deterioration in credit quality. The improvement was narrow with a near equal number of businesses improving and deteriorating in credit quality. Performance by geography and industry sectors was uneven.
Vidur Dhanda, Publisher, WAIN Street, said:
“The improvement is remarkable considering the drama in D.C. at the start of October. However, one should not read too much in the narrow improvement of the headline number. Businesses continue to face strong headwinds as reflected in the steep decline in consumer confidence, weak business investment and decrease in small business optimism. The variations in credit quality by industry sector and geography revealed by the index reinforce the need for a high resolution perspective in addition to high-level aggregate indicators.”
Highlights from the November 2013 report:
- LA, AK, SD and VA business default rate less than half national rate
- AZ and NV default rate more than double national rate
- MS, GA and AL business credit quality improved the most in last twelve months
- Mining sector businesses continue six-month trend of deterioration in credit quality
- Construction sector default rate 1.5% higher than national rate
- Information sector default rate 1.5% lower than national rate
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.
A complete report is available here: http://wainstreet.us2.list-manage.com/track/click?u=31d4f8e7b92887aaa3e45830d&id=9497ea62b8&e=c2226dfc31
About the WAIN Street Business Default Index
The Business Default Index (BDX) is the first component of the WAIN Street Business Credit Health Index™ BCH Index). Every month, the BCH Index aggregates multiple micro-level indicators concerning nearly 30 million businesses to reflect the holistic credit health of obligors nationwide.
Methodology
The BDX is based on the credit performance of a subset of nearly 18 million businesses that have been tracked by WAIN Street for over 12 months. An equal-weighted aggregate, the BDX reflects the incidence and severity of defaults.
Defaults arise whenever there is non-performance of an obligation. The BDX incorporates the spectrum of defaults – delinquencies, charge-offs, and bankruptcies. Business-level defaults are pooled within demographic segments based on industry, geography, employee size, and business age. Default events within a segment are aggregated using weights designed to reflect default severity. Segments are assigned weights to reflect the demographic structure of US businesses. Index values are obtained as the weighted harmonic mean across segments.
The BDX is seasonally adjusted and quoted as an annualized rate.
The index inception date is December 31, 2009.
Industry coverage
The BDX is designed to track “private, non-farm businesses” and excludes the following NAICS codes:
Description NAICS Code:
| Description | NAICS Code |
| Agriculture, forestry, fishing and hunting | 11 |
| Rail transportation | 482 |
| Postal service | 491 |
| Financial vehicles | 525 |
| Religious, grantmaking, civic, professional, and similar organizations | 813 |
| Private households | 814 |
| Public administration | 92 |
