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#1 G-20

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Posted 03 January 2007 - 02:23 PM

Credit Managers' Confidence Plummets
The monthly Credit Managers Index stands at its lowest level since April 2003.
Tim Reason, CFO.com
January 03, 2007

Confidence in the economy among corporate credit managers has apparently been slipping for quite a while. The evidence: the monthly Credit Managers Index, which fell for the fifth consecutive month in December, now stands at its lowest level since April 2003.

What's more, on a year-over-year basis, nine of the 10 components that comprise the index fell. The drop has been driven mostly by deterioration in the services sector, according to The National Association of Credit Management, which has conducted the monthly survey of the business economy from the standpoint of commercial credit and collections since January 2003.
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The data "strongly suggests" a slowing economy, according to NACM, which pointed out that seven of the 10 components that comprise the index declined in the most recent month.

For the CMI survey, the association asks about 500 trade credit managers to rate favorable and unfavorable factors in their monthly business cycle. Favorable factors include sales, new credit applications, dollar collections, and amount of credit extended. Unfavorable ones include rejections of credit applications, accounts placed for collections, dollar amounts of receivables beyond terms, and bankruptcy filings.

While the scores of credit managers in the manufacturing sector, buoyed by increased sale, have risen in the past two months, primarily on sales, service-sector scores fell for the third straight month, dragging down the overall index. In fact, eight of the 10 components comprising the service sector fell, according to the association.

A CMI score of more than 50 reflect a view that the economy is expanding, while a reading below 50 suggests a declining economy. On a year-over-year basis between last year and the year before, the total CMI Index fell 3.6, from 58.3 to 54.7, as nine of the 10 components fell.


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