NACM Credit Manager's Index Report for September 2005

“Hurricanes Katrina and Rita unmistakably left their marks on September’s Credit Manager’s Index (CMI). The rapid increase in economic activity shortly after a natural disaster is well documented, and these hurricanes are no exception,” says Dan North, Chief Economist with credit insurer Euler Hermes ACI. “In particular, data from the manufacturing sector show a significant spike in demand. Manufacturing sales and the amount of credit extended were both up sharply, suggesting that customers are scrambling to snatch up goods as quickly as possible. In the service sector, sales and new credit applications also suggest a significant jump in demand.”

“The only downside shown in the report,” says North, “was the worsening in bankruptcy conditions, which were probably aided by the impending change (Oct. 17) to more creditor-friendly bankruptcy laws.”

Manufacturing Sector Results
Sparked by increased sales and credit extended, the manufacturing sector CMI for September rose 370 basis points, to 56.6. New sales, which have been on a slight downward decline for the last five months, spiked to 74.1 percent in September, up 1,540 basis points from the previous month. This had been the highest level of new sales since May 2004, when sales reached 72.5 percent. This month also saw a rise in extended credit, up 760 basis points, from 60.8 percent to 68.4 percent.

Service Sector Results
For the third month in a row, the service sector CMI remained virtually unchanged, up slightly to 56.7 percent. Among the favorable factors, we see a 520 basis point jump in new sales and a 430 point jump in credit applications. As the service sector continues to show economic growth, with eight of the 10 factors above the 50 percent level, the overall rate of growth remains flat.

Comparison of September 2005 to September 2004
Comparing this September’s overall CMI to that of one year ago, we find that the overall CMI for September 2005 finished slightly higher, up just 50 basis points. Growth in new sales, in both the manufacturing and service sectors, contributed to the gain. Among all the September 2005 factors, eight of 10 show economic growth, compared to seven of the 10 in September 2004.