NACM Credit Manager?s Index Report for June 2006

?The Combined Credit Manager?s Index (CMI) rebounded sharply in the month of June, reversing much of May?s precipitous losses,? said Dan North, Chief Economist with credit insurer Euler Hermes ACI. On a seasonally adjusted basis, the CMI rose 2.3% to 57.2%. ?Dollar Amount Beyond Terms and Accounts Placed for Collection showed the strongest improvement,? he added, ?and suggest that customers have experienced an improvement in cash flow.? While the CMI continues to indicate economic expansion, it is important to note that other than last month?s trough of 54.9, the Index has not been lower than this since last October. ?This data suggests that while the economy is still growing, the rate of that growth is declining,? summarizes North.

Similarly, in its statement accompanying the 25 bps increase in the Fed Funds Rate on June 29th, the Federal Open Market Committee noted that ?Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year; partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.? ?In other words,? said North, ?as the Fed and the CMI indicate, the three major headwinds on the economy are starting to take effect.?

Manufacturing Sector

?The manufacturing sector index completely reversed last month?s losses and returned to the 56.6% level,? observed North. ?Dollar Amount Beyond Terms led the way with a huge 9.6% increase, easily beating the record change of an 8.0% drop in July 2002. However, the improvement was widespread as only one component out of the 10 fell, confirming a robust rebound.?

Service Sector

?The service sector index also recovered much of last month?s losses, and like the manufacturing sector, it was led by an improvement in Dollar Amount Beyond Terms. While the service sector index continues to indicate expansion, the changes this month were somewhat less sanguine than those in the manufacturing sector, as four of the 10 components fell,? apprised North.

June 2006 vs. June 2005

?The seasonally adjusted Combined Index rose 0.7% on a year-over-year basis, with a 1.1% increase in the service sector and a 0.3% increase in the manufacturing sector,? said North. ?Overall, seven of the 10 components rose for the year, suggesting modest improvement on top of already positive business conditions.? Methodology Appendix The CMI data has been collected and tabulated monthly since February 2002. The index, published since January 2003, is based on a survey of about 500 trade credit managers during the last 10 days of the month, with about equal representation between manufacturing and service sectors. The survey asks respondents to comment on whether they are seeing improvement, deterioration, or no change for various favorable or unfavorable factors. There is representation from all States, except some of the less populated such as Vermont and Idaho.