According to the National Association of Credit Management (NACM), the seasonally adjusted Credit Manager’s Index (CMI), which fell for the fifth consecutive month in December 2006, now stands at its lowest level since April 2003.
NACM’s data comes from the CMI, a monthly survey of the business economy from the standpoint of commercial credit and collections. CMI was launched in January 2003 to provide financial analysts with another strong economic indicator. The survey asks credit managers to rate favorable factors like sales, new credit applications and credit extended, as well as unfavorable factors, including rejections of credit applications, in their monthly business cycle.
“The [CMI] index fell 0.5 percent as seven of the ten components declined,” said Dan North, chief economist with credit insurer Euler Hermes ACI. The CMI data strongly suggests a slowing economy, and remains consistent with data from the rest of the macroeconomy including weak GDP growth for two consecutive quarters, durable goods orders (ex-transportation) falling for two consecutive months, modest holiday sales, and signs of weakness in the labor markets.
By contrast, NACM said the manufacturing sector has shown an increase in the past two months, primarily on sales, which bodes well for the future months. But comments from survey participants and a closer look at the data still show signs of weakness. Falling components “were offset by relatively large increases in just three components: sales, new credit applications and filings for bankruptcies,” said North. “Without these three, the manufacturing index would have fallen 0.3 percent.”
NACM, with headquarters in Columbia, MD, supports more than 25,000 business credit and financial professionals worldwide.
The complete CMI index, including results from the manufacturing and service sectors, along with the methodology, can be viewed online at http://www.nacm.org/resource/press_releases/CMI_current.shtml.