Kaulkin Ginsberg’s research team recently completed its examination of numerous accounts receivable management (ARM) centered economic indicators throughout the first half of 2017, and posted their detailed analyses on KG Prime. More specifically, we analyzed various consumer debt-related trends, in addition to changes in the number of new bankruptcies and collections-focused data. In all, we saw marginal growth in the majority of the trends thus far into 2017 – which is beneficial for the ARM industry, but nothing about which to be ecstatic. However, as we alluded to in a previous blog, although bad debt and other ARM-related economics metrics aren’t as substantial as they were a decade ago, current economic conditions and optimism should lead to greater consumer expenditures and accumulation of debt in the short-term, which may present significant collection opportunities in the near future.
One of the critical ARM-related metrics that we analyzed was the household debt service ratio, which provides us with a better understanding of how financially distressed consumers may be with regard to debt, and is illustrated in the above graph. This metric fluctuated quite moderately between 1981 and 2007, but grew, on average, over the 27 year period. Since the Great Recession’s end in mid-2009, however, the household debt service ratio has fallen considerably, decreasing about 17.7 percent compared to its peak. This suggests that current day bad debt levels shouldn’t compare to those preceding and during the Great Recession since consumers aren’t as distressed. Additionally, after considering other market-related and economic data, this trend may allude to the fact that consumers should be able to better repay their existing debts, facilitating more efficient first- and third-party collections.
But how does this metric compare against the other debt service ratios (e.g., mortgage debt service ratio and the broader financial obligations ratio) and what can we infer from the other critical ARM-related measurements’ trends? Join KG Prime today to access the full, in-depth analyses on all of our 2017 ARM-related metrics updates, in addition to hundreds of others market and economic articles. Sign up to see the trends, graphs, and takeaways so that you can apply them to your own business forecasts.
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