NACM Credit Manager's Index Slips in July But Shows Growing Economy

July’s Credit Manager’s Index (CMI) stood at 56.7 percent, firmly entrenched above the 50 percent level which implies economic growth. Although the CMI did slip 1.1 percent from June, Dan North, Chief Economist with credit insurer Euler Hermes ACI, believes the decline was largely the result of two highly correlated components; the amount of credit extended, and sales, the component that shows the most monthly variation. “This data suggests that the decline was more related to volatile top-line growth as opposed to a more deeply rooted deterioration in credit conditions. While downward trends in many of the other components of the Index could represent headwinds arising from tightening monetary conditions, higher energy prices, and weakness in Europe, the overall Index continues to reflect reasonably strong economic growth,” says North.

Manufacturing Sector Results
The manufacturing sector continued its downward slide, ending the month of July at 56.9 percent, down 40 points from just one month ago. Lower sales and amount of credit extended pushed favorable factors down 240 points, while lower amounts of customer deductions and accounts placed for collections helped boost the unfavorable factors up 90 points.

Service Sector Results
NACM’s Service CMI finished at 56.6 percent, a 180-point drop from June 2005. Although there was erosion in both factors, it was the drop in favorable factors that greatly impacted the overall decline in the service sector. All four favorable factors contributed equally to the 350-point drop in the favorable index. Overall, erosion was found in eight of the 10 service factors.

Comparison Of July 2005 To July 2004
Compared to the levels of just one year ago, the overall CMI fell 260 points, finishing at 56.7 percent. Despite this decline, nine of the 10 factors still exhibited economic expansion, with levels above the 50-percent neutral mark. This same expansion can also be found in the manufacturing sector; while in the service sector, we find eight of the 10 factors above 50 percent.

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. More information is available at www.nacm.org.