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Tale of Two Recoveries Redux

June 24, 2011 by Dan Meder

So, sometimes it takes a little while for the popular press to catch up. I say that because on June 14th, an article ran on msnbc.com talking about, of all things a “Tale of Two Economies”. Well, if they had seen our blog on May 18, they would have seen that we could have told them that a while ago. At the time, our data (going as far back as March) was showing there were two distinct sets of economic conditions. In fact, in our view, the big business community was actually thriving, partially at the expense of the small business guy.

On what basis did we make that determination? Payment deterioration. We were seeing about a 5x incidence of severe payment delinquency among small businesses as we saw among large businesses. But to add to that, nearly 60% of all small business delinquent dollars were stretching to severely slow, while less than 10% of the large business delinquencies were going to that extreme.

The msnbc.com article, based on AP and Reuters contributions, quoted a survey by the National Federation of Independent Businesses (NFIB) as having seen a 3rd straight month of decline in optimism. The reason? Weak optimism was due to the weakness of the recovery. Our position was that opening up lending to small business would be a big help, given the fact that large businesses were putting a strain on small business cash flow by extending their payments to the small business community.

June 17th on CNBC’s Squawk Box , Jim Rohr of PNC Bank, indicated that in Q1, almost a billion dollars in small business loans were made. This was up significantly from the past. That trend is continuing into the second quarter. Mr. Rohr feels that this should inject some added optimism into the small business community. Hopefully he is correct.

We need it.

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