NACM Credit Manager's Index: report for March 2008.(Report)

For the first time since the seasonally adjusted Credit Manager's Index (CMI) was calculated in February 2002, the combined index has fallen below the crucial 50 level, indicating an economic contraction. It was the sixth decline in seven months, and a record six of 10 components fell. The service sector fell below 50 for the second consecutive month, while the manufacturing sector tied a record low of 51.0. "It was an unhappy report," said Daniel North, chief economist for credit insurer Euler Hermes ACI.

"The information in the report confirms other national data, such as negative growth in non-farm payrolls, record home foreclosures and real retail sales falling year over year, which indicate that the economy is almost certainly in recession," North said. While the Federal Reserve Bank has reacted quickly to soothe the turbulent financial markets, it takes up to a year for Fed interest rate cuts to have their full effect. "When that happens, and when the housing market finally regains its footing, then the economy will begin to recover, perhaps by the end of 2008 or the beginning of 2009," he concluded.

The seasonally adjusted manufacturing sector index fell 2.2% in March to 51.0%. "It was the second lowest reading ever after April 2002," North said. Eight out of 10 components fell, and there are now five components below 50. "It's no surprise that the housing market is the main culprit, but some respondents are pointing towards the economy in general," he said. A manufacturer of steel pipe reported that "Companies are asking for extended terms ...," while a packaging manufacturer noted a "Higher number of accounts being converted to cash-in-advance payment." North said, "It would appear that trade credit ...