Credit payment worsens in June

Higher energy prices and lower credit availability are weighing on the ability of businesses to pay off credit.

construction 88 224 (photo credit: Ariel Jerozolimski)
construction 88 224
(photo credit: Ariel Jerozolimski)
Higher energy prices and lower credit availability are weighing on the ability of businesses to pay off credit, according to a monthly report released Tuesday by Business Data Israel. The payment reliability report compiled by BDI showed that the average number of total late payment, or credit, days worsened in June to 10 days, one day more than in May. Similarly, the average credit period agreed to by businesses also deteriorated slightly and stood at 90 days, compared with 89 in May. "Many local businesses are having difficulties in getting credit lines and are forced to make use of their own capital to be able to finance their activities," BDI economists said. "As a result of the credit crisis faced by companies, there is pressure from suppliers to increase the number of credit days in agreement." The construction sector had the most lax payment norms in June; the average payment of both building-material suppliers and building contractors was 23 days beyond agreed deadlines, BDI said. Payments were also made 19 days late among newspapers and printing houses. In the food and beverage sector payments averaged 18 days behind the agreed deadline during June. The increase in oil prices led to a deteriorating payment ethic among fuel, electricity and energy producers and suppliers, the BDI economists said, with a 10-day average delay in June. Broken down by sectors, the most reliable deals were made in the paper and carton sector, where average payment was one day late. The next best was the leasing, rental and financial services insurance sector, with an average of three days of delayed debt payment. A separate BDI report also released on Tuesday showed that the average weighted risk level in the economy worsened in the second quarter of 2008. It rose to 5.84, up from 5.72 during the same quarter last year. "Instability in global markets, the increase in the prices of raw materials and the weakness of the dollar opposite the shekel are the main factors for the rise in the risk level of businesses in the economy over the past quarter," the BDI economists said. Sector analysis of business risk showed that the devaluation of the dollar against the shekel raised the risk level of the tourism and hotel sector by 17 percent in the first six months of the year, compared to the first half of 2007. The hike in oil prices increased the average business risk level of the haulage and aviation businesses in June to 6.88, up from 6.60 in May. That was closely followed by the tourism and hotel sector with an average business risk level of 6.84. The strongest and most secure sector in June was the chemicals sector, with an average business risk level of 5.18. That was followed by the metals sector, with an average business risk level of 5.67, and the plastics and rubber sector, with an average business risk level of 5.69.