NACM Credit Manager?s Index Slips in December

December’s Credit Manager’s Index fell 2.5 percent to 54.9, a level still associated with economic expansion. But the manufacturing sector took a sharp plunge of 4.8 percent, while the services sector slipped only 0.2. The only positive component in the manufacturing report was the improvement in bankruptcy activity.

Dan North, Chief Economist with EulerHermes ACI, notes that otherwise, manufacturing was weak all around, particularly in the Index of favorable factors where all four components fell at least 7.6 percent, amounts that were not entirely attributable to seasonality.

The total Manufacturing Index is down 2.1 percent from last year, three of the manufacturing components are now below the 50 percent level, which indicates a slowdown, and the sales component for the manufacturing sector is down 21.1 percent since September. By contrast, five of the ten components in the Service Index rose, pushing it up 0.2 percent from last month and up 2.0 percent from last year, while only one component is below 50 percent.

“However,” North says, “in both sectors, dollar collections and dollar amount beyond terms fell the most, easily wiping out last month’s gain, suggesting that customers might be short on cash flow. Higher energy costs, interest rates, and labor rates are likely culprits. November’s drop in fuel price may help ease the situation next month.”

To read the full release and report, please visit http://www.nacm.org/resource/press_release/CMI_current.shtml.