A Quarterly Report Tracking Late Payments and Business Failures
Dun & Bradstreet’s quarterly report tracks payment delinquencies (91+ days past due) and business failures across nine key U.S. industries: Manufacturing, Retail, Transportation, Real Estate, Business Services, Personal Services, Construction, Automotive, and Financial Services. Delinquency rates and bankruptcy rates provide a snapshot of two metrics of overall financial health to facilitate better understanding of benchmark trends, leading to better credit management.
Overall Failures and Delinquencies
As demonstrated in the charts above, overall business failure rates have been declining throughout 2018, while trade credit delinquency rates are on the rise. Businesses seem to be stabilizing in the backdrop of a strong labor market and GDP growth; possibly resulting in the dip in insolvency and bankruptcy filings. However, while businesses are growing – hiring workers, producing goods, and providing services – they are struggling to meet their payment obligations on time. Overall rates of delinquent payments (91+ days past due) stayed below 3% from Q4 2014 to Q1 2018, before hitting 3.0% in Q2 2018 and 3.06% in Q3 2018.
Failures and Delinquencies by Industry: Q3 2018 Trends
Business failures and delinquency rates vary considerably by industry. In the chart above, you can see that on average, business failures declined by 16.8% on an annual basis with most of the major industries showing a decline on an annual basis as well. Only the Financial Services (1.6%) and Automotive (0.8%) industries saw increases in business failures in Q3 2018. Business Services – which has the lowest failure rate – is currently an area of growth. This sector includes businesses that provide data and analytics insights, and some of the current expanding demand for predictive data and analytics insights across a spectrum of industries.
The Retail sector seems to be leveling out against upheaval in traditional brick-and-mortar stores, which has seen multiple bankruptcy declarations by major brands across the U.S. A slight uptick in failures in the Financial Services industry signify some financial pressure within that sector. Small businesses within this sector seems to be lacking stability and finding it harder than the average business to keep their doors open. This segment is one to be watched carefully in the upcoming months.
Of the overall average rate of businesses making severely delinquent payments -- 3.06% -- five ranked higher. Some are struggling with their everyday business processes, and late payments are reflected as a part of that. In Q3 the Automotive and Transportation sectors have the highest rates of delinquent payments, due to the slow growth in demand within them.
Delinquent payment data is compiled from D&B’s global trade database to calculate delinquency rates; Dun & Bradstreet processes more than 1.5 billion trade experiences every year. Business failure data comprises bankruptcy filings in the U.S., as well as businesses that closed their doors with severe outstanding debt relative to their size.
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