NACM Credit Manager's Index Slips in August

Slippage continues in the economy?s rate of growth for the fourth consecutive month. Although growth continues, as evidenced by readings exceeding 50, it is slowing. The CMI-Total number is 360 basis points lower than the high recorded in April of this year. The composition of the decline since April is as follows: service sector down 550 basis points, manufacturing sector down 180 basis points.

MANUFACTURING SECTOR RESULTS
There is additional slippage in manufacturing growth for August. The decline is driven by five of the six ?unfavorable factors?. The only unfavorable factor to improve is ?rejection of credit applications??meaning fewer accounts were rejected. The survey results indicate several negatives at work: growth in accounts placed for collection, growth in disputed invoices, growth in the aging of accounts, growth in unauthorized customer deductions, and growth in firms filing bankruptcy. The last time this many factors declined was December 2003. There are a couple of positive interpretations to take away from these results. The sales index shows a significant rebound and the overall manufacturing index of 58.7 is still quite bullish. The improvement in ?amount of credit extended? suggests further sales improvement next month.

SERVICE SECTOR RESULTS
The story for the service sector is that it held ground during August, losing only one-tenth of a point. ?New credit applications? and the ?amount of credit extended? sharply improved this month. However, ?dollar collections? deteriorated. This latter result is driven by the decline in sales last month. Although fewer accounts were given to collection agencies, the number of disputes increased.

COMBINED SECTORS
The combined index has now fallen four consecutive months and is at its lowest level since February 2004. The erosion is caused by slowing of growth in both sectors. However, erosion in growth is more significant in the service sector (down 550 basis points) than in the manufacturing sector (down 180 basis points).

The improving indices for ?sales? and ?amount of credit extended? suggest the overall index has reached bottom, at least for the near term, and will probably show marginal improvement next month.

METHODOLOGY APPENDIX
The CMI data has been collected and tabulated monthly since February 2002. The index, published since January 2003, is based on a survey of about 500 trade credit managers during the last 10 days of the month, with about equal representation between manufacturing and service sectors. The survey asks respondents to comment on whether they are seeing improvement, deterioration, or no change for various favorable or unfavorable factors. There is representation from all States, except some of the less populated ones, such as Vermont and Idaho.

The National Association of Credit Management (NACM), headquartered in Columbia, Maryland supports more than 25,000 business credit and financial professionals worldwide with premier industry services, tools and information. NACM and its network of Affiliated Associations are the leading resource for credit and financial management information and education, delivering products and services, which improve the management of business credit and accounts receivable. NACM’s collective voice has influenced legislative results concerning commercial business and trade credit to our nation’s policy makers for more than 100 years, and continues to play an active part in legislative issues pertaining to business credit and corporate bankruptcy. George W. Gallinger, Ph.D., of the W. P. Carey School of Business, Arizona State University, Tempe, AZ prepared the index results and analysis. More information is available at www.nacm.org or by contacting Norma Heim at 410-423-1842.

For this entire release, please visit http://www.nacm.org/resource/press_release/pressAug04.html.