Manufacturing Credit Index Falls to Record Low

Deteriorating sales and payment patterns are the credit managers' main complaints.

The nation's economic woes continue to plague the business community as credit managers reported deteriorating conditions in December, sending a major credit index to another record low at the end of 2008.

The National Association of Credit Management (NACM) Credit Manager's Index recorded its fourth consecutive record low in December, hitting a level of 40.1. The seasonally adjusted manufacturing index fell 1.4 to 41.0, its fourth consecutive record low.

"All 10 components of the index are below the 50 level, representing economic contraction, and six of the components are at record lows," said Euler Hermes ACI Chief Economist Dan North, who claimed that the "carnage was widespread." Both the services and manufacturing indexes fell to record lows to finish out 2008, and all 20 of the collective components fell below 50 as indicated by the index.

"The nation's credit managers delineated in nauseating detail the business conditions of an economy which has lost almost 2 million jobs in the last year, and one whose prospects are dismal," North said. "Deteriorating sales and payment patterns are the credit managers' main complaints, and those complaints are likely to strain cash flow and put businesses at risk."

North said that the grim news to end the year comes as no surprise. "Retailers had abysmal holiday sales, which are likely to contribute to a wave of bankruptcies in 2009," he explained. "Continuing difficulties in both the auto industry and the financial markets are putting a severe drag on the economy, and the housing market is still in decline."

However, 2009 may offer signs of hope for the business landscape, as "it is possible that a change in administrations, super loose monetary policy, and a new stimulus package will help us out of the recession," North concluded. "But according to the credit managers, it's going to be a rough ride until then."

The full Credit Manager's Index report and archives may be viewed at http://web.nacm.org/cmi/cmi.asp.

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