Credit Manager's Index: Expansion Continues Despite Another Drop

The seasonally adjusted Credit Manager's Index (CMI) took another small step down in September. The Index fell from 57.3 to 57.1 as six of the 10 components for the combined sectors fell. "However, all 10 components still remain above 50, indicating economic expansion," said Dan North, Chief Economist with credit insurer Euler Hermes ACI. "The CMI continues to show an economy with good momentum, but one which is slowly trending downward, probably due to the combination of a plummeting housing market and tightened monetary conditions."

Columbia, MD (PRWEB) October 2, 2006 -- The seasonally adjusted Credit Manager's Index (CMI) took another small step down in September. The Index fell from 57.3 to 57.1 as six of the 10 components for the combined sectors fell. "However, all 10 components still remain above 50, indicating economic expansion," said Dan North, Chief Economist with credit insurer Euler Hermes ACI. "The CMI continues to show an economy with good momentum, but one which is slowly trending downward, probably due to the combination of a plummeting housing market and tightened monetary conditions."

"The manufacturing sector index once again lagged the performance of the service sector, turning in a drop of 0.5% on a seasonally adjusted basis," noted North. He continued, "In addition, two of the components - disputes and the amount of customer deductions - are now below 50, indicating contraction. The concrete, steel, electrical components and rubber manufacturers were particularly hard hit, no doubt because of the weakening housing and construction markets. New credit applications and the amount of credit extended suffered the largest drops, suggesting weakening demand on the buyers' side."

The service sector index rose 0.2% on a seasonally adjusted basis, as six of the 10 components rose, and all of the components remained above 50. "However, dollar collections took a sharp drop, suggesting slowing cash flow on the buyers' side," North observed. "Good conditions were spread across a variety of industries. The weakest industries were wholesalers of metals, electrical equipment, lumber and construction materials. The slump in housing and construction is clearly affecting services as well as manufacturing."

North stated that on a year over year basis the CMI shows mostly good news, rising slightly from 56.5 to 57.1. Manufacturing rose 0.3% while the service sector rose 0.9%. "Two components were prominent in both sectors," he said. "Bankruptcies dramatically improved because the change to more creditor-friendly laws in October of 2005 caused a surge of businesses to declare bankruptcy before that change, leaving an easy comparison. And sales dropped sharply in both sectors: manufacturing sales fell 7.7% and service sector sales fell 4.8%. This is a somewhat worrisome development as sales can lead other business conditions."

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.

The CMI survey asks credit managers to rate favorable and unfavorable factors in their monthly business cycle. Favorable factors include sales, new credit applications, dollar collections and amount of credit extended. Unfavorable factors include rejections of credit applications, accounts placed for collections, dollar amounts of receivables beyond terms and filings for bankruptcies. A complete index including results from the manufacturing and service sectors, along with the methodology, is attached. A complete view of the index can be viewed online at http://www.nacm.org/resource/press_release/CMI_current.shtml.

The National Association of Credit Management (NACM), headquartered in Columbia, Maryland supports more than 25,000 business credit and financial professionals worldwide with premier industry services, tools and information. NACM and its network of Affiliated Associations are the leading resource for credit and financial management information and education, delivering products and services which improve the management of business credit and accounts receivable. NACM's collective voice has influenced legislative results concerning commercial business and trade credit to our nation's policy makers for more than 100 years, and continues to play an active part in legislative issues pertaining to business credit and corporate bankruptcy. www.nacm.org

Contact:
Norma Heim, NACM
410-740-5560

# # #