NACM credit manager's index: report for July 2008.

The seasonally adjusted Credit Manager's Index rebounded slightly in July, gaining 0.8% as the manufacturing sector index rose 1.6% and the service sector index crept up 0.2%. All three indexes--combined, manufacturing and service--are hovering just above the crucial 50 value, indicating a slight degree of economic expansion. "There was little in the data to provide a compelling picture of credit conditions one way or another," said Daniel North, chief economist for credit insurer Euler Hermes ACI. "For instance, for the combined index, six of the 10 components fell and six remain below 50, yet the index itself rose and remained above 50. Similarly, comments from the participants were a mix of good news, bad news and price increase news."

North said, "The report actually reflects very closely the state of the business cycle and the Federal Reserve's dilemma. The Fed faces six straight months (seven, as of August 2nd) of job losses, but also faces consumer price inflation of 4.9%. Given that, either a rate cut or increase could easily be the wrong move. The Fed's assessment of the economy will probably be the same as those of credit managers as a whole; it's somewhere right in the middle. And the best choice for right now might be to sit tight."

The seasonally adjusted manufacturing sector index rose above the 50% level in July, gaining 1.6%, but four of the 10 components fell and six remain below 50. Comments from survey participants were similarly mixed.

Good News

"More jobs started."

"Sales and production still very strong."

"June was the first positive month in a long time. Our customers are finally re-ordering."