Credit Index Growth Continues

August 2, 2004
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COLUMBIA, MD — Though minor slippage in economic growth occurred in both manufacturing and service sectors in July, strong growth continues in the economy.

That is the conclusion which the National Association of Credit Management (NACM) draws from its credit manager’s index for July.

The survey asks manufacturing and service sector credit managers to rate favorable and unfavorable factors in their monthly business cycle.

Favorable factors include sales, new credit applications, dollar collections and amount of credit extended. Unfavorable factors include rejections of credit applications, accounts placed for collections, dollar amounts of receivables beyond terms and filings for bankruptcies.

The survey’s July composite index for both sectors was 59.2, down from 60.1 in June.

An NACM index above 50 indicates economic growth. The index has hovered around 60 since March and has been above 55 for 12 consecutive months.

According to NACM, minor slippage in economic growth occurred in both the manufacturing and service sectors in July and the August index is expected to show further mild erosion.

But on a month-over-month basis, NACM says the index shows growth is still stronger than recorded during the fourth quarter of 2003 and into the first quarter of 2004.

The modest dip in economic activity that NACM’s index reflects is paralleled in other major economic indicators.

A more detailed look at the index components reveals that in manufacturing, the sales index rose to almost 60 last August, peaked at a very strong 78.4 in April and was down to 71.7 in June. Indexes for dollar collections and amount of credit extended peaked in June at 71.7 and 71.3 respectively.

In the service sector, the comparable indexes showed a similar pattern, with indexes in the low 70s.

Pulling the overall index for both sectors down were high indexes for bankruptcy filings 62.6 and 62 respectively in service and manufacturing.

Other indexes in the credit managers’ unfavorable factors — credit rejections, accounts placed for collections and disputes — were relatively low, but still above 50.

One may view the full July report at nacm.org/resource/press_release/pressJuly04.html.

NACM professes to work with about 25,000 business credit and financial professionals worldwide.

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