Credit data indicates tougher times ahead

MEDIA RELEASE
Credit data indicates tougher times ahead for business

AUCKLAND, 7 July 2009 – Latest data from New Zealand’s largest credit bureau shows a staggering increase in the number of businesses not paying their bills and defaulting.

Veda Advantage New Zealand Managing Director John Roberts says “in the first six months of the year we have really seen the recession hit business hard and sadly, our prediction is that it is only going to get tougher for the business community.”

First six months year-on-year comparisons show a massive 64.56 percent increase in commercial defaults from 2008 to 2009. On top of this commercial inquiries for credit are down 16.43 percent.

“We are already seeing businesses fail in this economic climate and we predict that more will follow – we urge all businesses to keep a close check on their debtors.”

However Veda’s data does offer some optimism – a small lift in demand for consumer credit suggests the country may have hit the bottom of the economic downturn.

Mr Roberts says “after two consecutive years of decline in consumer demand for credit, the decline has fallen off – which indicates the downward cycle is starting to plateau.”

Since 2006 Veda’s statistics show consumer demand for credit has been falling. First six months year-on-year comparisons show demand fell by more than ten percent in 2007 and 2008.

Demand for credit is still down but in the first six months of 2009 it fell by 8.19 percent compared with the first six months of 2008.

“We are not bouncing out of the downturn – we all knew that wouldn’t happen, but the positive news is that consumers have likely seen the worst.”

In Veda’s experience the commercial sector lags behind the consumer sector by up to 18 months.

“This means that business is still on the downward trajectory of the economic cycle and it could be 2011 before conditions improve.”

Percentage change graphs:

Click to enlarge
Total Consumer Inquiries First Six Months Year on Year Comparison

Click to enlarge
Commercial Inquiries and Defaults First Six Months Year on Year
Comparison

Please note: for commercial reasons Veda Advantage is unable to provide raw data.

ENDS

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