CMI shows positives

by

Published: June 5,2009

COLUMBIA, MD. — Lately, there has been a great deal of discussion about whether or not there is reason for some optimism regarding the U.S. economy’s recovery. The National Association of Credit Management believes its May Credit Managers’ Index (CMI) shows the worst may be over.

The latest CMI combined index rose from 44.3 to 45.4, which equals levels not seen since October 2008 when the overall economy began its major slide. The index is now only a few points away from breaking above the 50-point threshold that would indicate expansion as opposed to contraction.

The specifics within the survey are even more interesting as they reveal some important driving factors in economic recovery. For example, sales jumped from 37.4 to 41.8, representing one of the biggest increases in the last several months. There has also been substantial movement in the new credit sphere and that is a sign that businesses have started to lean toward expansion again. One of the underlying factors the CMI captures is the access to capital. Without the presence of additional open capital markets, there is no opportunity to expand credit; the CMI is now showing that some of that credit is being extended again.

Additionally, a couple of negative factors declined, reflecting some stability in terms of delinquencies and disputes and some reduction in dollars outstanding.__

By most accounts the manufacturing sector is just now showing some positive movement this month, and it is possible that credit activity in the sector may have provided some advance warning. There is evidence that manufacturing in general is still in the process of a shakeout, which provides both positive and negative elements. On the negative side there has been an increase in bankruptcies over the past several months (although the pace has slowed). But this negative can be a positive in the months ahead as the remaining competitors have more access to market share.

The growth in the service sector has been most impressive this month, jumping from 43.5 to 45. This has been spurred by higher sales and a very dramatic expansion of credit.

[RSS Feed] [del.icio.us]



To sign up for Mississippi Business Daily Updates, click here.

POST A COMMENT

 

FOLLOW THE MBJ ON TWITTER

Top Posts & Pages