NACM Credit Manager's Index for February

The Credit Manager’s Index (CMI) continues to mirror developments in the overall U.S. economy, rapid changes from month to month, comments Dan North, Chief Economist with credit insurer Euler Hermes ACI.

The February CMI showed a strong snap back from January’s weakness, led by sharp gains in sales, new credit applications, and amount of credit extended-all favorable items oriented towards the top line. Gains were solid in both the service and manufacturing sectors, with the latter benefiting the most. It was the first increase in the manufacturing sales component in five months, and only the second in eight months.

“The recent volatility of the CMI is confirmed by the GDP data, which was much weaker than expected in 4Q05, but looks to be very strong in 1Q06, partially because the consumer held off purchases until the new year,” says North. “Other data also indicates that while the economy is strong now, it is likely to weaken after the first quarter as the Fed’s tightening takes hold. It takes about a year for Fed actions to work through the economy, so the effects of the tightening, which are reflected in the inverted yield curve, are only beginning to be felt. Similarly, a recent survey indicates widespread optimism for 2006 among CEOs, but at the same time earnings growth for the S&P 500 companies is likely to fall in 2006 to an estimated 6%-7% from 14% in 2005.”

To view the entire release, including date, please visit NACM Credit Manager’s Index for February.