The Credit Managers’ Index (CMI) for July – available now at www.nacm.org and Thursday in eNews – will reflect the grim reality of the economy of summer 2012. It became obvious some months ago that another spring swoon was underway and, like the last few years, the summer was an extension of the deterioration, according to various CMI statistics.
“The problems that beset the economy earlier in the year have not abated and, now, there are some new ones to worry about [the farm sector, the Euro crisis],” said NACM Economist Chris Kuehl, who prepares the CMI each month. “There are some signs of nascent recovery, but thus far these have not been enough to reverse the course of the last few months.”
And it’s the unfavorable factors that are telling more of a downbeat story, which has Kuehl more worried than the slide in the favorable indicators.
“The index of unfavorable indicators has now dipped below the magic 50 line that separates expansion from contraction; This is the first time the unfavorable index has been in contraction since the end of 2010, Kuehl said. “This is a precipitous fall, and it is unlikely that a reversal will be swift…the slump is setting in more aggressively.”
Among the biggest areas of concern is the dollar amount beyond terms decline. To wit, problems in that area could be foreshadowing that customers are experiencing newfound cash-flow issues most thought were over at the official end of the recession. Meanwhile, generally weak consumer confidence and a lack of importing interest from struggling European-based trade partners are compounding the negatives.
Courtesy of Brian Shappell, CBA, NACM staff writer