Although the summer ended without a rate hike from the US Federal Reserve, interest rates will likely go up sometime later this year or in 2016, as the Fed moves from an accommodative policy to a more restrictive monetary policy. Rates have been at or near zero since late 2008.
By using Dun & Bradstreet’s rich data on industries, it’s possible to understand which companies by industry vertical have the strongest balance sheets and are best positioned to withstand the higher interest rates that loom ahead.
D&B has traditionally looked at all active and open US business establishments by geography, once in January and again in May. This time we also applied our three leading proprietary indicators of risk to 12 common US industry segments.
Key Industry Findings
Retail, telecommunications, and transportation: These industries have lagged their counterparts since 2010. But now they have closed the gap significantly with other top-tier, lower-risk industries. This is a signal that recovery is becoming more comprehensive and is gaining strength as all industries are now participating in the overall improvement in the economy.
Business services: This broad-based industry improved the most year-to-date against other industries. This is great news for the breadth of the overall economy as this sector contains the highest number of company records in Dun & Bradstreet’s database.
Manufacturing: Despite a strong US dollar, businesses in the manufacturing vertical have used the fall in commodity prices and associated cheaper inputs to shore up their balance sheets and improve their payment performance year-to-date.
Natural resources: Businesses in the natural resources vertical have used years of strong cash flows to position themselves well since 2010. But a deep nosedive in global commodity prices has put pressure on this vertical, and it’s the only industry where scores have fallen sharply since January 2015.
Dun & Bradstreet’s three proprietary indicators include the Overall Business Health Index, which uses three components of Dun & Bradstreet’s most predictive scores to provide a holistic view of company risk.
The Total Loss Predictor helps to gauge the likelihood a business will have a first payment default, the Delinquency score predicts the likelihood that an establishment will pay in a severely delinquent manner (91+ days past due), and the Viability ranking tracks whether a company will remain viable and in business, all with a 12-month time horizon.
By aggregating these micro-scores and separating them by industry vertical, D&B can capture the effects of changing risk and offer deep insight into potential industry performance and resiliency.
|Performance by Industry, December 2010 – September 2015|
|Source: Dun & Bradstreet|
Adam Morehouse is a Macro Analytic Consultant on D&B’s Global Data, Insight & Analytics team. He covers parts of the Asia Pacific region as a contributor to D&B Macro Market/Country Insight Products. He also contributes to D&B’s monthly economic tracker, adding both commentary and analysis. Adam holds a BBA in finance from James Madison University in Harrisonburg, Virginia, and an MBA in financial management from Pace University in New York City.