NACM Credit Manager's Index: report for August 2008.(CMI)

The seasonally adjusted Credit Manager's Index has inched even closer to the neutral economic expansion/contraction point of 50%, creeping down 0.2% to hover at 50.7%. The manufacturing sector index slipped a full percentage point to 50.4%, as only four of its 10 components rose. The service sector index fared better, gaining half a percentage point, rounding out at 51.0% as six of its 10 components rose. All three indexes have six components at or below the 50% level.

"Overall, there were no dramatic changes from July's report," said Daniel North, chief economist for credit insurer Euler Hermes ACI, who evaluates the data and prepares the report for the National Association of Credit Management. "However, in both manufacturing and service, dollar collections and the dollar amount beyond terms worsened," he continued. "The data suggest that tough economic conditions are strangling buyers' cash flow. Buyers are stretching their payment terms beyond normal and even after that, it appears that they still cannot pay their bills."

The seasonally adjusted manufacturing sector index slipped 1.0% in August, leaving six of its 10 components below 50%. "Prices seem to be less of an issue this month in terms of hurting business, but instead they are inflating credit limits and sales," said North. "Slow pay seems to be the biggest problem." North noted that a manufacturer of valves and pipes reported, "Customers are looking for ways to slow payments." A plastics producer replied, "We are having to exert more effort to get payment for receivables," while a sheet metal firm reported, "We have some of the bigger customers attempting to extend terms." North said, "On the flip side, international business seems strong, probably due to the ...