Credit Index Shows Economic Expansion

The Credit Manager's Index - produced monthly by the National Association of Credit Management - indicates further economic expansion in the wake of a surprisingly resilient economy, says Euler Hermes ACI Chief Economist Dan North.

(PRWEB) May 3, 2006 -- The U.S. economy continues to show “surprising resilience” as manufacturing and service sectors indicate further economic expansion, according to economic analysis released by the National Association of Credit Management (NACM) and provided by Euler Hermes ACI Chief Economist Dan North.

The NACM Credit Manager’s Index (CMI) fell a modest 0.6% for the month of April on a seasonally adjusted basis. The decline was comprised of a 1.7% fall in the service sector index and an offsetting rise of 0.5% in the manufacturing sector index. “While there was no particular concentration of changes in the components, the surprising resilience of the economy continues to shine through,” commented North. “For the first time since July of 2004, all of the components in all of the indexes are above the 50% mark, indicating economic expansion. As far as credit managers are concerned, the economy is firing on all cylinders.”

Despite rising interest rates and high energy costs, North said the housing market is not cooling as quickly as expected, and consumer confidence remains strong. “It is worth noting, however, that Federal Reserve Chairman Ben Bernanke has openly cited rising energy prices as a threat to the economy, prompting the financial markets to forecast a greater than 50% chance of more tightening at the next Fed meeting on May 10,” he said. Such an increase would be the 16th over the past two years, from 1% to 5%, which is a “very significant tightening” of monetary policy.

Manufacturing Sector
The manufacturing sector index rose 0.5% in April on a seasonally adjusted basis. The increase was a result of an improvement in the unfavorable factors of 1.2% being offset by a deterioration of favorable factors of 0.6%. All of the 10 factors that comprise the CMI finished above 50 – indicating economic growth – but there was little discernable pattern. Improvements in collections, disputes, and customer deductions were largely offset by declines in new credit applications and rejection of credit applications.

Services Sector
In contrast to the manufacturing sector’s improvement, the services sector index fell 1.7% in April on a seasonally adjusted basis as both the favorable and unfavorable components fell. Also, in contrast to the manufacturing sector, collections deteriorated significantly. In addition, a sharp fall of 4.6% in the sales factor contributed to the overall decline. But, like the manufacturing index and the combined index, all 10 of the factors in the services index finished above 50, again indicating sustained economic growth.

April 2006 vs. April 2005
The seasonally adjusted combined CMI improved 1.5% on a year-to-year basis. The increase was widespread as eight of the 10 factors were better than the previous year in the combined and service indexes, while seven factors improved in the manufacturing sector. A decline in bankruptcy activity was the largest single contributor in both sectors, reflecting the resilience of the economy over the past year.

The CMI, a monthly survey of the business economy from the standpoint of commercial credit and collections, was launched in January 2003 to provide financial analysts with another strong economic indicator. A complete view of the index can be viewed online at www.nacm.org.

Euler Hermes ACI is North America’s oldest and largest provider of trade credit insurance and risk mitigation solutions. For more information about Euler Hermes ACI, visit www.eulerhermes.com/usa.

Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,400 employees in 41 countries, Euler Hermes offers a complete range of services for the management of customer receivables. The North American subsidiary (Euler Hermes ACI) is headquartered in Owings Mills, MD. For more information visit www.eulerhermes.com/usa.

Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor’s rates the group and its principal credit insurance subsidiaries AA-.

Press Contact:
Rick Ostopowicz
Euler Hermes ACI Public Relations and Communications Specialist
Phone: (410) 753-0652

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