Core Insights Blog

Signs of a recovery in sight?

As you might imagine, we’re data geeks here at Cortera; and with over $250 billion a month of payment records to play with, we spend a fair amount of time trying to interpret and summarize what we see.  One of the statistics that we thought was striking was the percent of payments that were reported past-due in the most recent reporting cycle.  Overall, payment behavior continues to slow: across all industries; if you were owed a debt in March, our data shows you waited 12% longer to get paid than you did at the end of last year.

Given the contraction in consumer spending, none of us are particularly surprised at the retail figure below; however it’s pretty sobering to realize that $1.02 out of every $5.00 owed by a retailer is past due.  (BTW- this number represents about a 9% overall increase since December.)

What really jumps out at us are the manufacturing sector figures. 18% of trade debt owed by manufacturers is past due. That’s up from 16% just 3 months ago.  We typically see a cycle tied to how businesses; especially manufacturers, pay their debts.  It goes something like:

•    sales decline → payments slow down to preserve cash → hiring slows down (or layoffs occur)

So we’re expecting the cycle to work in reverse as the economy recovers:

•    sales increase → payments improve → hiring resumes

There are hints of improvement in the first phase of the cycle, such as last week’s announcement by the Commerce Department  of durable goods orders in April, but the continued slowing of manufacturing trade payments suggests that we still have some time before we see the effects of a recovery, if indeed that’s the direction we’re going.

Our May numbers will be out in about a week.  It will be interesting to see what the trend is doing.  We’ll post them here when available.

5 Slow Paying Industries
(reporting month ending 3/31/2009)

% Past Due

1- RETAIL TRADE

20.41%

2- MANUFACTURING

18.05%

3- SERVICES

15.19%

4- FINANCE, INSURANCE, AND REAL ESTATE

15.04%

5- WHOLESALE TRADE

14.06%

All Cortera Companies

12.95%

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2 Responses to “Signs of a recovery in sight?”

  1. F. Aaron Ford says:

    While I see the logic associated with these numbers, my experience has been the opposite in the consumer lending arena. While it is true that many industries will see positive trending as you discussed, the average consumer will usually hesitate longer to respond, ensuring that the movement will have a positive hold. In light of the recent economic upheavals we have seen, I predict that consumer confidence will lag at least 6 to 12 months behind.

  2. [...] the progress shown above, the industry is still hurting; remember that on Tuesday, I posted that the benchmark past-due percentage across all industries is 12.95% .  A/R currency [...]

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