NACM Credit Managers Index March 2007

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The seasonally adjusted Credit Manager’s Index (CMI) fell in March for the seventh time in eight months, losing 1.6%. The decline was driven by the dollar collections component, which fell a record 7.8%, but the weakness was widespread. "Even without the drag of the dollar collections component, the combined index would have fallen, as a total of eight out of the 10 components fell," said Dan North, Chief Economist with credit insurer Euler Hermes ACI. "Collections problems also appeared in the accounts placed for collection component, which is now below the 50 level, signaling economic contraction," he noted. "The weakness in collections suggests that businesses are having cash flow problems, reflecting the erosion of the economy as a whole."

"Certainly credit managers are starting to feel the effects of a deflating housing bubble and a slowdown in the economy caused by the Fed’s tightening," North continued. "Businesses in both services and manufacturing have been particularly hard hit by the slowdown in construction spending and the dramatic fall-off in the demand for building materials. With the median price of existing homes falling for seven consecutive months on a year-over-year basis, it would appear that the effects of the bursting housing market bubble will continue for some time. In the meantime, the plethora of negative data from the first two months of 2007, such as weak job growth, a dramatic fall in durable goods orders, slack retail sales, and of course deteriorating conditions in the sub-prime mortgage market, all reflect an economy sure to continue in slowing."

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