According to an excerpt from the May 2009 National Association of Credit Management, Credit Managers’ Index:
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 phrases are showing up everywhere: “green shoots” and “light at the end of the tunnel” and even references to a “phoenix rising from the ashes.” “Those who have been watching the Credit Managers’ Index have been able to refer to these improvements for three months already, and the May data carries the same theme,” said Chris Kuehl, Ph.D., NACM economist.
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 certainly moving in the right direction and is now only a few points away from breaking above the 50-point threshold that would indicate expansion as opposed to contraction. Kuehl said, “The recession essentially came to an end in February and March of 2009. The CMI data, combined with various other measures, suggest that the economy finally reached its lowest point and has been in the recovery stage since.” Kuehl pointed out that this doesn’t mean the economy will come roaring back in the next few months, but asserted that the second quarter will be the last quarter of negative GDP as the third quarter should show some growth.
The Credit Managers’ Index (CMI) is created from a monthly survey of credit and collection professionals.
The CMI survey asks NACM members 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 results provide a benchmarking and forecasting tool that looks at the entire cycle of commercial business transactions.
More about the National Association of Credit Management (NACM).
Hat tip to Betty Beard for alerting me about this index.
Comments 3
So, I assume indexes like this and the Case-Shiller Housing index are indicators for potential economic movement?
Posted 04 Jun 2009 at 5:37 am ¶Yes, they can serve as indicators.
One of the major issues with this recession involves the concept of credit. People over-extended with credit as a cause, and lack of access to credit after the crash.
So, I would think that the opinions of those who manage that credit would seem important in this recession and could serve as a “leading” indicator of economic performance.
That’s the reason why I think this index carries some weight right now.
Posted 04 Jun 2009 at 9:01 am ¶Speaking of Robert Shiller, here’s some recent commentary from him, via The New York Times:
Why Home Prices May Keep Falling
Posted 07 Jun 2009 at 9:19 pm ¶Post a Comment