NACM Credit Manager?s Index for March

Following gains seen last month, the Credit Manager’s Index (CMI) posted even stronger indicators for March.

“While seasonal factors played a role in this increase,” said Dan North, Chief Economist with credit insurer Euler Hermes ACI, “the underlying strength of the economy demonstrated in the first quarter continues to provide solid support for the Index and its components.”

The strength was widespread as the 4.9 percent monthly increase for the entire Index tied the record increase set three years ago. Record gains were also seen in four of the ten service sector components.

“As in February, the bulk of the gains was in the four favorable factors: sales, new credit applications, dollar collections and credit extended?all factors which suggest a likelihood of continued growth,” continued North. “Similarly, all of the components for the service sector and for the total Index are now above the 50 percent level, which indicates economic growth.”

The manufacturing sector continues to lag a bit, as six of its ten components are still lower than they were a year ago, while none are lower in the service sector.

“The strong overall tone of the Index and of the economy in general could be a mixed blessing,” adds North. “However, as the Federal Reserve raised its benchmark interest rate to 4.75 percent and suggested that it may increase borrowing costs more this year. This will almost certainly have the affect of slowing the economy later in 2006 and into 2007.”

Comparison of March 2006 to March 2005
New sales recorded higher levels in both the manufacturing and service sector, compared to one year ago. Within the manufacturing sector, credit managers indicated fewer rejected credit applications and saw slightly lower levels of bankruptcy filings. This trend was repeated in the service sector; which also showed lower levels of disputes. “Lower levels of disputes likely indicates solid cash flow and companies rendering prompt payment of invoices,” said North.

For this complete release, including data tables, please visit NACM’s web site.