Equifax Quarterly Commercial Insights: September 2024
- Overall business credit applications increased by +0.7% (vs September quarter 2023)
- Business loan applications grew +4.5% (vs September quarter 2023)
- Asset finance applications fell by -6.8% (vs September quarter 2023)
- Trade credit applications declined -4.1% (vs September quarter 2023)
SYDNEY – 30 October 2024 – Demand for commercial credit increased in the September quarter 2024 with some industries reaching out for credit at higher volumes to manage challenging economic conditions, the latest data from Equifax reveals.
According to the Equifax Quarterly Commercial Insights - September 2024, commercial credit demand rose by +0.7% in Q3 2024 compared to the same quarter the previous year. Increased business loan demand (+4.5% vs the same period in 2023) was the main driver behind this rise, with strong demand seen in the hospitality (+14%) and retail (+7%) sectors. Meanwhile, asset finance (-6.8%) and trade credit applications (-4.1%) applications both fell in Q3 2024 compared to the same quarter 2023.
Scott Mason, General Manager Commercial and Property Services, Equifax, said: “Hospitality and retail often see a spike in activity in the summer and festive seasons, so an increased appetite for business loans among these industries could indicate businesses bolstering their finances ahead of a busy period. However, we are seeing other indicators that suggest this increased reliance on credit could be cause for concern.
“Business owners in hospitality, retail and construction are experiencing higher levels of mortgage stress compared to their peers in other industries. Those in the hospitality sector have +30% higher mortgage arrears than business owners in other industries, followed by construction at +15% and retail at +11%. Similarly, arrears rates for credit cards and personal loans have increased sharply since January of this year for business owners in these sectors. This tells us that the people behind the businesses in these sectors are feeling the pressure,” Mr Mason said.
Equifax data also shows that adverse rates on commercial credit applications are increasing, with enquiries received in August 2024 having +42% more adverse on file compared to 12 months ago. Worsening market conditions is the main driving factor, with varying impacts on industry sectors.
“Credit enquiries from businesses in the hospitality industry are the most likely to have some form of adverse on file. Given this industry’s heavy reliance on credit, this is a concerning trend,” Mr Mason said.
Signs of stress growing in commercial centres
Victoria showed signs of weakening market conditions, with the state experiencing a decline in overall commercial credit demand and the lowest growth in business loan applications among the commercial centres.
“Victoria and New South Wales often act as bellwethers for market trends in the rest of the country. This quarter, commercial credit demand took a hit in Victoria and remained flat in New South Wales, which could signal a slowdown for other states in coming months,” Mr Mason said.
Insolvency rates at the total market level increased by +43% in the September quarter 2024 vs the same period in 2023. While high insolvency rates were observed across all regions, insolvency volumes in Victoria are growing at a faster rate than other regions - up +67% year-on-year, the highest reported insolvency figures for the state in the last four years.
While the construction industry still accounts for the greatest volume of insolvencies, the hospitality sector is starting to close the gap. Hospitality insolvencies increased +205% year-on-year in Q3, and +40% quarter-on-quarter - the highest increase in the market.
“Victoria was the stand out in Q3 with hospitality insolvencies increasing +260% in the state. More broadly, businesses across all industry sectors had elevated insolvency levels in Victoria compared to other commercial centres,” Mr Mason said.
Business credit demand September 2024 vs September 2023:
Overall business credit applications improved (+0.7%) in the September quarter 2024. SA (+8%) and NT (+8%) experienced the largest increases in commercial credit demand, followed by WA (+6%) and QLD (+2%). TAS saw the largest decrease in business credit applications (-5%), followed by ACT (-4%) and VIC (-2%), while NSW (0%) was flat.
Business loan applications increased (+4.5%) in Q3 2024 compared to the previous year. SA (+15%) and NT (+11%) led the increases in demand, with ACT (+9%), WA (+7%), QLD (+6%), NSW (+4%) and VIC (+1%) also seeing positive growth. TAS (-6%) was the only region to experience a decline.
Trade credit applications fell in Q3 2024 (-4.1%). The eastern states all experienced declines, led by ACT (-8%) and VIC (-7%), followed by NSW (-5%) and QLD (-3%). SA (0%), WA (0%) and NT (0%) were all flat, while TAS (+5%) experienced growth in demand.
Asset finance demand fell -6.8% in the September quarter. VIC (-9%), NSW (-9%) and TAS (-9%) experienced the biggest decreases in demand, followed by QLD (-4%) and SA (-4%). WA (+7%) saw the strongest growth, followed by NT (+6%), and ACT(+1%).
IMAGE 1: Overall Commercial Credit Demand – September 2024 Quarter
IMAGE 2: Equifax Commercial Credit Demand Index by categories of credit – September 2024 Quarter
IMAGE 3: Business Loan Applications State Overview, 2024 Q3
IMAGE 4: Asset Finance Applications State Overview, 2024 Q3
ABOUT EQUIFAX INC.
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics, and technology company, we play an essential role in the global economy by helping financial institutions, companies, employers, and government agencies make critical decisions with greater confidence. Our unique blend of differentiated data, analytics, and cloud technology drives insights to power decisions to move people forward. Headquartered in Atlanta and supported by nearly 15,000 employees worldwide, Equifax operates or has investments in 24 countries in North America, Central and South America, Europe, and the Asia Pacific region. For more information, visit www.equifax.com.au or follow the company’s news on LinkedIn.
FOR MORE INFORMATION
mediaenquiriesAU@equifax.com
NOTE TO EDITORS
The Equifax Quarterly Commercial Insights (formerly Business Credit Demand Index) measures the volume of credit applications that go through the Equifax Commercial Bureau by financial services credit providers in Australia. Based on this, it is considered to be a good measure of intentions to acquire credit by businesses. This differs from other market measures published by the RBA/ABS, which measure new and cumulative dollar amounts that are actually approved by financial institutions.
DISCLAIMER
Purpose of Equifax media releases:
The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.
