Manufacturing Improvements Lead Credit Managers' Index Jump in January

Feb. 2, 2010
Growth is attributed to manufacturers starting to replenish inventories.

The bulk of the GDP growth in the fourth growth is attributed to manufacturers starting to replenish inventories, mostly since the beginning of December according to the National Association of Credit Management (NACM).

"The jump in manufacturing was stark and unexpected and, since the decline registered in the last iteration of the Credit Managers' Index (CMI), there has been a major leap in some critical areas," said Chris Kuehl, Ph.D., economist for NACM. "The combined CMI saw a jump from 52.9 to 55.1, which is impressive enough, but the real movement came from the manufacturing side," he said.

Reinforcing the message coming from the economy as a whole, the manufacturing sector jumped from 52.1 to 55.1, reversing the trend from the December index when the sector stagnated and slipped in terms of positive factors.

There was an improved atmosphere in both manufacturing and service sectors resulting with the most activity in the combined index's favorable factors, specifically sales and new credit applications. Sales in the combined index jumped from 56.7 to 60.7, marking the first time this figure has been above 60 in 18 months.

There was also progress in new credit applications -- a jump from 54.2 to 57 -- signaling movement in the credit sector despite ongoing issues in the financial community. One of the biggest leaps came from dollar collections, which sported readings in the 40s just nine months ago and is now at 61.3. The same pattern can be seen in amount of credit extended, now standing at 58.8 after sitting in the 40s just five months ago.

"The past pattern in the index suggests that this is developing into a classic recession exit," said Kuehl. "The deterioration of inventory and the dramatic reduction in capacity utilization meant that any spark of demand would propel business out of this predicament and, as in past recessions, the months following the end of these strategies would show substantial growth. The trillion-dollar question is whether this growth surge can be maintained throughout the rest of the year."

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