Non-mining states growing faster than mining states for first time in two years
Veda Quarterly Business Credit Demand Index: June 2013
Veda’s Quarterly Business Credit Demand Index: April to June 2013
- Business credit growth increased 5.5% year on year
- Non-mining states demonstrated stronger growth than mining states for the first time in two years
- Business loans, asset finance and trade credit applications increased year on year
Sydney, Australia, 30 July 2013: Veda, Asia-Pacific's leading provider of consumer and commercial data intelligence and insights today revealed the results of its business credit demand index for the second calendar quarter of 2013. The index, which measures the change in credit demand for the June quarter compared to the same period in 2012, showed that overall business credit demand in the quarter increased to 5.5% over the past year, up from 2.2% in the March quarter and 3.7% in the December quarter. The growth by month was 5.1% in April, 4.8% in May and 7.7% in June 2013.
The growth in overall business credit applications was driven by growth in business loans (+9.9%), asset finance (+5.8%), and trade credit (+1.1%) and is climbing closer to the relatively strong growth rate of 6% seen in the September 2012 quarter.
The improvement in business credit enquiries has largely been driven by improvement in the non-mining states. Growth in overall business credit applications across the non-mining states picked up from 1.8% in the March quarter to 6% in the June quarter, while growth across the mining states (WA, QLD and NT) edged up from 3.1% to 4.6%.
“The non-mining states are now showing stronger growth in business credit enquiries than the mining states for the first time in over two years. This is possibly due to lower investment decisions than we have previously seen in the mining states and perhaps a response to lower interest rates in the non-mining states. However, it does remain to be seen whether the recent improvement will be sustained,” said Moses Samaha, general manager of commercial credit risk at Veda.
Overall business credit applications picked up in the June quarter in all states except WA and the ACT. Among the non-mining states, VIC (+7.8%), TAS (+7.6%) and NSW (+5.1%) recorded the strongest results , while applications were slightly weaker in the ACT(+4%) and SA (+3.2%). Across the mining states, QLD (+4.5%) and the NT (+10.4%) showed a pick-up in growth, but growth in WA eased from 5.3% in the March quarter to 4.4% in the June quarter.
Growth in business loan enquiries increased in all states except WA and the NT in the June quarter, with the strongest growth seen in the ACT (+13.9%), VIC (+12.8%) and NSW (+10.2%). The other non-mining states also recorded solid results with SA (+7.6%) and TAS (+4.0%) strengthening in the quarter. In the mining states, growth eased for the third consecutive quarter in WA (+8.4%), the NT also eased (+4.5%), while QLD (+7.5%) picked up.
Trade credit enquiries returned to positive growth (+1.1) in the June quarter, following a contraction in the March quarter. Trade credit growth was strongest in the NT (+11.5%) and Tasmania (+10.2%), followed by VIC (+5.5%) and WA (+2.4%). Despite overall growth, weakness in trade credit enquiries was apparent in a number of states in the June quarter, with NSW (-1.7%), Queensland (-0.2%), SA (-2.1%), and the ACT (-5%) recording decreases.
The pace of growth in asset finance enquiries picked up for the second consecutive quarter. Overall growth of +5.5% year on year was driven by solid increases in the non-mining states, with TAS (+9.3%) and NSW (+7.9%) recording the strongest results, followed by VIC (+4.2%), SA (+4.6%) and the ACT (+2.3%). In contrast, asset finance enquiries eased in the mining states in the June quarter, with the weakest result being recorded in WA (+1.6%), while QLD (+6.8%) and the NT (+18.1%) remained reasonably strong.
There has also been a significant increase in commercial enquiries from new businesses, categorised as having less than four years of operation, relative to established businesses.
“We are witnessing a relatively large amount of activity by financial institutions aimed at stimulating credit activity in the SME space, and it is looks like we are beginning to see the effect of this” said Samaha.
Veda’s Business Credit Demand Index has historically proven to be a good indicator of how the overall economy is travelling, with movements in the index being highly correlated with growth in real GDP, investment in machinery and equipment, and building construction.
“Given the historical relationship between the Veda business credit demand index and growth in real GDP, the latest data would be consistent with the annual growth rate of real GDP running at around 3% per annum, which is slightly stronger than the rate of 2.5% recorded in the year to the March quarter,” said Samaha.