The document summarizes an economic briefing by Paul Ballew, Chief Data & Analytic Officer at D&B. Some key points: - The Small Business Health Index declined further in the current month, prompting D&B to be more cautious in its economic outlook. However, employment growth is still expected to continue rebounding. - Imbalances in small business performance across industries and geographies continue to decline but some disparities remain between regions. - Overall, US business health continues to strengthen, with previously lagging industries and areas catching up. However, a drop in the SBHI warrants monitoring economic data in the next quarter.

1. Paul Ballew, Chief Data & Analytic Officer, D&B
Tuesday, April 1, 2014 – 8:30AM
Economic Briefing
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2. Overview
• The Small Business Health Index erode further during the
current month and has prompted D&B to become a bit
more cautious on the economic outlook.
• Abnormally poor weather remains a factor and therefore
Q2 readings will provide a better assessment of the
underlying strength of the recovery.
• Employment growth is expected to continue to rebound
in March with payroll employment growth of close to
200,000
• The Business Health Tracker remains at record levels and
is up 5% y-o-y reflecting once again the strong balance
sheet health of the private sector.
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3. The economy is still reeling from short term
factors that caused a slowdown in the recent
months
84.0
88.0
92.0
96.0
100.0
104.0
52.0
54.0
56.0
58.0
60.0 SBHI shows Slowdown in Business Activity
Small Business Health Index: Overall (right)
ISM Nonmanufacturing Business Activity Index: 3-month Moving Avg.(Left)
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• The drop in the SBHI
signals the economy is
still recovering from the
long harsh winter
• The weather has started
improving but the drag
that it has left on the
economy remains
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4. On a more positive note the improvement in
small business health over the last two years has
become more pervasive across verticals
6.00
6.50
7.00
7.50
8.00
8.50
9.00
9.50
Standard Deviation of SBHI by Vertical • There is a steady decrease in the
standard deviation of SBHI by
vertical which is an indication of
correction in the structural
imbalance
• The imbalance in small business
performance by vertical
continues to decline and stands at
its lowest since January 2013
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5. By geography, the imbalance seems to be
more pronounced
187.8
168.4
139.8
123.4 122.5
0.0
40.0
80.0
120.0
160.0
200.0
Atlanta,GA New Orleans,LA Miami,FL Nashvl-Dvdsn,TN San Antonio,TX
Small Business Health Index: Top 5 MSAs
76.9 76.9 77.5 77.8 81.0
0.0
40.0
80.0
120.0
160.0
200.0
Chicago,IL Richmond,VA Salt Lk Cty-
Ogden,UT
Hartford,CT Phoenix,AZ
Small Business Health Index: Bottom 5 MSAs
• There remain large disparities between the highest and the
lowest performing MSAs
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6. … with marked differences in growth patterns
0%
10%
20%
30%
40%
50%
60%
70%
80%
2010 2011 2012 2013
Atlanta, GA MSA: YOY Change in SBHI
-15%
-5%
5%
15%
25%
2010 2011 2012 2013
Chicago, IL MSA: YOY Change in SBHI
• While the leading geographies have taken off growth during the
past year, the lagging ones have slowed down
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7. And unlike performance across industry
verticals the dispersion by MSA has partially
reversed course
0.0
5.0
10.0
15.0
20.0
25.0
30.0 Standard Deviation of SBHI by MSA
• The dispersion between MSAs
fell sharply early in the recovery
period and has remained stable
until early 2013
• The slight increase in dispersion
during the past year may be a
reflection of the shifting growth
patterns among MSAs
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8. U.S. Jobs Health
• Based on the underlying factors, D&B expects Nonfarm payroll employment to
improve this month, building on the trend from last month
• All sectors are expected to gain, with the notable being Retail and
Construction that have been held back by the weather
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9. U.S. Business Health Index
• The overall US Business Health Index slightly increased in March to reach 53.15%. The index
recorded its sixth-consecutive sequential increase and its ninth consecutive month above the
important 50% “neutral” level.
• Again, this was the highest level recorded since the inception of the index in December 2010
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10. • On a year-over-year basis the overall index increased 5.0 percentage points, a slightly lower growth
rate compared to the previous two months.
• All three components increased on a 12-month basis in March. The Viability component continued
to record double digit year-over-year growth albeit at a slower pace.
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14
Y/YPercentageChg.
Note: Delinquency rates and the Total Loss Predictor are inverted to capture the effects that lower rates will raise the overall score.
Overall Viability Delinquency Total Loss Predictor
U.S. Business Health Index
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11. 20
25
30
35
40
45
50
55
Variance by industry
100
150
200
250
300
350
400
450
Dec-…
Mar-…
Jun-11
Sep-…
Dec-…
Mar-…
Jun-12
Sep-…
Dec-…
Mar-…
Jun-13
Sep-…
Dec-…
Mar-…
Variance by employment size
2
3
4
5
6
7
8
9
10
Dec-…
Mar-…
Jun-11
Sep-…
Dec-…
Mar-…
Jun-12
Sep-…
Dec-…
Mar-…
Jun-13
Sep-…
Dec-…
Mar-…
Variance by geography
The virtuous cycle continues—Variance among
all components in the Overall Business Health
Index is dropping
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12. 47
48
49
50
51
52
53
54
55
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Retail--Business Health Index (3-month moving average)
Hard hit sectors like retail have made
significant progress over the last year despite
the lack of robust consumer spending growth
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13. 400
500
600
700
800
900
1000
1100
1200
Source: U.S. Census Bureau
New Private Housing Units Authorized by Building Permit (SAAR, Thous.Units) Housing Starts (SAAR, Thous.Units)
46
47
48
49
50
51
52
53
54
55
56
57
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Real Estate
Real estate firms are also well positioned even
as the moderate recovery in housing has
stalled a bit
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14. • Despite a drop in the SBHI that has been remarkably stable for several months
D&B continues to project growth of close to 3%. The drop does warrant
attention and clearer readings in Q2 have become very important
• On a positive note industries that have lagged the recovery are experiencing
improvement and are poised to benefit from an acceleration in economic
growth
• Correction of structural imbalances is the pre-requisite for sustained
growth and it seems the economy has started on this journey
• US businesses continued to broadly strengthen their balance sheet health in
March. The Business Health Index reiterates the same story: many lagging
industries and regions are performing at an improved pace and are “catching
up” to their comparable counterparts.
Summary
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