BlueTarp's spending and delinquency chart, 2Q18
Courtesy of BlueTarp

Strong economics and optimistic customers helped drive BlueTarp Financial's Building Supply Index to record heights in the second quarter, the credit management company announced today. But it also noted that the percentage of accounts receivable dollars that are at least 60 days past due has risen 16% since the summer of 2017.

The index--based on public data such as consumer sentiment, building permits, and construction spending, along with proprietary data--hit a record 139.16, while the trailing 12-month average for this seasonally volatile index jumped to 132.48 from 130.91 in the first quarter. A value above 100 reflects healthy economic activity. BlueTarp bases its proprietary data on accounts with more than 120,000 customers that it manages for more than 2,000 construction supply stores nationwide.

BlueTarp survey results, 2Q18
Courtesy of BlueTarp

Consumer confidence is a big driver, as optimism about the U.S. economy has risen 7% year-over-year. But pros aren't far behind, as roughly three times as many respondents to a BlueTarp survey said in the second quarter that they were expecting more growth as opposed to a decline. More than half of the respondents said sales are up compared with this time last year.

Despite that rosy scenario, the percentage of accounts receivable dollars that are at least 60 days past due has gone up roughly one-sixth since 2017's second quarter, Portland, Maine-based BlueTarp found. “We continue to warn that elevated delinquencies are a danger to be heeded," president and CEO Scott Simpson said. "A shock to the system, whether from trade policy or other disruption, will transform these delinquencies into bad debts and bankruptcies. Prudent dealers and contractors should be preparing now for darker days to come.”

To help illustrate the situation, BlueTarp has for several years tracked pro contractors using an X-Y chart that takes account of both the amount of money pros spent and their delinquency rates. Most recently, both the size of spending and of delinquencies have risen.

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