Euler Hermes, the world's largest provider of trade creditinsurance, mines its database of receivables each quarter toproject performance of the broader economy. “Our clients aretelling us who is paying slowly, for how much, and how far they arebehind,” says Dan North, chief economist at Euler Hermes. “Past-duereceivables indicate that a company doesn't have enough cash to payall its bills that are due today. Revenue may not matchexpectations, or the company may not be able to get financingbecause its creditors are seeing some degree of financial stress.So we look at trends in past-dues as a sign of financial stress byindustry and across the economy overall.”

The Euler Hermes Receivables at Risk Index tracks closely withgross domestic product (GDP). “The correlation between the two is0.7, which is fairly high for an economic time series,” North says.“It turns out the Receivables at Risk Index is a pretty goodindicator of what the final GDP is going to show.”

For the fourth quarter of 2014, the index suggests annualizedGDP growth will be significantly lower than the third quarter's 5.0percent but might be higher than the advance estimate from theBureau of Economic Analysis, released last month, which peggedQ4/2014 GDP at 2.6 percent. The index suggests receivablesdeteriorated in Q4/2014 in terms of both the frequency with whichaccounts were past due and the severity, the proportion of thereceivable that was past due.

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