While risk in Core Retailing, Hardware Retailing and Commercial Construction appears to be rising, Residential Construction sector seems to be doing okay.
Our regular data series, which we provide to the New Zealand Hardware Journal, assesses the level of credit risk posed by the four business sectors most closely associated with the Construction & Hardware industry:
- Residential Construction
- Commercial Construction
- Hardware, Building & Garden Supplies Retailing
- Core Retailing
Below is the New Zealand Hardware Journal’s commentary:
In our last post (2 August – find it here), the June month’s data continued to show good cashflow and payment profiles, somewhat flying in the face of all the negative forecasts around the construction sector.
Jumping now to August, CreditWorks’ latest real-world risk data reveals an interesting mixed bag.
First, it is evident that there is increased risk appearing around Core Retailing, particularly in the 20-40% likelihood of failure category (scroll down for the graphic).
“While still reasonably slight, the adverse movement is becoming noticeable,” comments CreditWorks’ Alan Johnston.
Similarly, in the Hardware / Building / Garden Retailing sector, there is now more discernible evidence of greater risk around the 40-80% likelihood of failure category.
“It is a bit worrying at this level. There is a clear deterioration in this sector which will need to be watched closely over coming months,” warns Alan.
Commercial Construction shows a similar pattern and the August risk in the 40-80% category is now four times more than in June.
Clearly cost of living and inflationary issues are big factors in these results.
The good news?
“Residential Construction is still in a strong position,” says Alan, “with volume of work, and good cashflow ensuring there is no risk deterioration in this sector.
“CreditWorks’ data, and our latest insights into this sector show that risk and debt aging is the lowest in the sectors we monitor.
“Indeed, the ‘headwinds’ in the Residential sector are reducing all the time, and are starting to resemble more of a ‘breeze’ every day,” he concludes.
We hope to share more in-depth information around CreditWorks’ unfashionably optimistic outlook for the Residential Construction sector online soon and in the next edition of NZ Hardware Journal.
Now see the charts below for a visual explanation of the last three months’ risk profiles across our four chosen sectors.
The left axis indicates the % of a sector that is at risk. The bottom axis shows the % likelihood of failure over the next 18 months.