There has been a great deal of concern in the financial sector as the world reacts to the mounting threats from the “Greek disease.”  While it has been acknowledged that the crisis is disrupting the markets in Europe as well as the rest of the world, there has been relatively little impact on the rest of the global economy to this point. The data from May’s Credit Managers’ Index, issued by the National Association of Credit Management (NACM), seem to suggest that this turmoil is having an impact on the U.S. credit and business community—perhaps more than most people realize.

“Over the last few years the CMI has tended to be a harbinger of things to come as far as the overall economy is concerned as it covers the activity in the credit and financial communities,” said Chris Kuehl, Ph.D., NACM economic advisor, who prepares the CMI report each month. The CMI dipped in 2008, three months before the rest of the economy started to react to the banking debacle that engulfed the U.S. and the rest of the world soon after.  Now the CMI is dipping again—and dramatically—while at the same time the rest of the economic indicators have barely started to respond. “The sense among observers has been that the Greek crisis and its implications would soon have the same kind of impact on the credit environment that the sub-prime crisis had in 2008. Last month’s data seems to bear this out.”  There has been deterioration in both positive and negative factors across the board. Sales have slipped from 65.7 to 64.5. The level of dollar collections fell as well—from 62.1 to 59.7. There was also a reduction in the level of credit as the financial system tightened again.

Some of the more urgent changes took place in the negative categories. The dollar amount of customer deductions fell from 55.7 to 51.8. There is a sense that accounts have become nervous again and have started to worry about their access to capital in the coming months as well as their ability to keep generating sufficient demand to maintain their growth expectations. “There is not the level of panic that existed in the months leading up to the credit meltdown, but there is far more concern about what is happening in the global markets than existed even a few weeks ago,” said Kuehl.   The full report for May, complete with additional analyses, tables and graphs, along with the CMI archives, may be viewed here.    Source :  Dr. Chris Kuehl, Armada Corporate Intelligence and NACM

BIIA Newsletter July I – 2010 Issue