Euler Hermes Chief Economist: Difficult Business Conditions Lie Ahead

OWINGS MILLS, Md., Oct. 1 /PRNewswire/ — While the trade credit sector has
seemingly weathered the storm brought on by the recent credit crunch, the Chief
Economist for the nation’s leading trade credit insurer sees a more challenging
business environment ahead.

In his latest commentary and analysis on the nation’s economy based upon a
nationwide survey of credit managers, Euler Hermes ACI Chief Economist Daniel C.
North said he saw little change in the U.S. manufacturing and service sectors.
"The [survey] data showed mixed conditions, since small gains in the service
sector were offset by modest losses in the manufacturing sector," he stated.
"While this month’s data does indicate a slight decay, we are seeing continued
economic expansion in these sectors."

As credit markets continue to face difficulties related to the subprime
mortgage crisis, trade credit has not seen the same effects. "So far, trade
credit conditions seemed to have weathered the storm which recently roiled the
public debt markets," said North. "The turmoil has been only one of several
indicators which have many economists starting to feel increasing discomfort
about the economy’s future. Slower growth and more difficult business conditions
almost certainly lie ahead. The credit managers who have done so well keeping
problems to a minimum up until now might find a more challenging environment in
the rest of 2007 and into 2008."

According to North’s analysis, the manufacturing sector showed losses of 1.3%
in September. The two largest drops were the accounts placed for collection
component and the disputes component, and comments from credit managers were
quite telling. North commented, "Indeed, one [survey] respondent from the
machinery industry seems to be encountering particularly bleak conditions,
saying, ‘Had more companies just closing their doors and walking away. No assets
to recover.’ Another reported that ‘Orders are being canceled or modified after
the initial order.’"

Meanwhile, the nation’s service sector index showed gains 0.6% for September
as declines were very modest. However, North said that despite mostly positive
results in the survey, "the few negative comments received centered on the
housing industry," demonstrating continued weakness in that sector.

On a year-over-year basis, the combined manufacturing and service sectors
showed declines of 2.3% – a further telltale sign of an economic slowdown. "The
data indicates that, as far as credit managers are concerned, the economy is
definitely deteriorating, but not by much, and at a rather slow pace," North

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