NACM Credit Manager's Index: report for January 2006.(CREDIT MANAGER'S INDEX)(National Association of Credit Managers)(Statistical data)

January's Credit Manager's Index continues to suggest that the economy is reasonably strong, but it also shows a worrisome downward trend, advises Dan North, Chief Economist with credit insurer Euler Hermes ACI. While the Index now stands at 53.7, indicating modest economic growth, it is also down substantially from November's 57.4, and three of the Index's 10 components are now below 50. The manufacturing sector has fallen for seven of the last nine months--six out of nine for services--and in January, seven of 10 components fell in both the manufacturing and services sectors. This data reflects trends in some of the most recent macroeconomic data: weak fourth quarter GDP of 1.1 percent, a faltering housing market, and below expectations reports for both December job growth and from the Institute of Supply Management (ISM) Index. "Once again, high energy costs, rising interest rates, a flat yield curve, and a weakening housing market are the major drags on the economy," says North. "The consumer has been the offsetting factor, which has kept the economy growing and the CMI above 50, but consumers could hit a rough patch if their two sources of funding dry up--financing from home equity and credit cards, and incomes, which are falling below consumption. The overall picture suggests that business conditions could weaken in the spring, given the possibility of a consumer slowdown and the trends in the CMI."

The first month of the new year saw little change to the manufacturing sector. The CMI ended January 2006 just slightly below the December 2005 level, ...