Credit Manager's Index Slips in September on Slow Growth

The seasonally adjusted Credit Manager’s Index (CMI), issued monthly by the National Association of Credit Management, fell 0.3 points in September to 54.8.

The loss may appear small but seven of the 10 component that make up the index fell, said Dan North, chief economist with credit insurer Euler Hermes ACI.

“The data showed mixed conditions since small gains in the service sector were offset by modest losses in the manufacturing sector,” he said. “While this month’s data does indicate a slight decay, only two components have slipped below the 50 level indicating expansion,” he continued. “So far, trade credit conditions seemed to have weathered the storm which recently roiled the public debt markets. The turmoil has been only one of several indicators which have many economists starting to feel increasing discomfort about the economy’s future.”

North notes that slower growth and more difficult business conditions almost certainly lie ahead. “The credit managers who have done so well keeping problems to a minimum up until now might find a more challenging environment in the rest of 2007 and into 2008,” he concluded.

The manufacturing sector fell 1.3 points as seven of 10 components fell. The two largest drops were the accounts placed for collection component and the disputes component.

North said, “Indeed, one respondent from the machinery industry seems to be encountering particularly bleak conditions by the comments, ‘Had more companies just closing their doors and walking away. No assets to recover.’ And another reported, ‘Orders are being canceled or modified after the initial order.’”

The service sector index gained by 0.6 as seven of 10 components rose. All of the components are above the 50 level indicating expansion, and the declines were modest.

“Once again, despite mostly positive results, the few negative comments received centered on the housing industry,” said North.

The Credit Manager’s Index fell 2.3 points (4%) over the past 12 months. Nine of the 10 components fell and the other one was unchanged. Both the service and manufacturing sectors declined as eight components fell in each of the sectors. North concluded, “The data indicate that as far as the credit managers are concerned, the economy is definitely deteriorating, but not by much, and at a rather slow pace.”