According to recent data from the Credit Managers’ Index (CMI), it looks like the U.S. economy’s recovery status is looking up. For the past four months, results have shown that consumer confidence is up, durable goods orders are up, first time claims for unemployment are down and even the much beleaguered housing market is showing some movement.
The latest CMI combined index rose from 44.3 to 45.4, which equals levels not
seen since October 2008 when the overall economy began its major slide. The
index is certainly moving in the right direction and is now only a few points
away from breaking above the 50-point threshold that would indicate expansion
as opposed to contraction. “The recession essentially came to an end in
February and March of 2009. The CMI data, combined with various other measures,
suggest that the economy finally reached its lowest point and has been in the
recovery stage since,” said
Chris Kuehl, Ph.D., NACM economist. Kuehl also pointed
out that this doesn’t mean the economy will come roaring back in the next few
months, but asserted that the second quarter will be the last quarter of
negative GDP as the third quarter should show some growth.
The specifics within the survey are even more interesting as they reveal some
important driving factors in economic recovery. For example, sales jumped from
37.4 to 41.8, representing one of the biggest increases in the last several
months. There has also been substantial movement in the new credit sphere and
that is a sign that businesses have started to lean toward expansion again. One
of the underlying factors the CMI captures is the access to capital. Without
the presence of additional open capital markets, there is no opportunity to
expand credit; the CMI is now showing that some of that credit is being
extended again. Additionally, a couple of negative factors declined, reflecting
some stability in terms of delinquencies and disputes and some reduction in
There is still a great deal of regional and sector variation, which mirrors the
performance of the U.S. economy as a whole. The states that have seen the
highest rates of job loss and bankruptcy - California, Florida, Michigan and
Ohio - are seeing the weakest performance in terms of credit. However, some
states seeing severe declines - most notably Arizona and Nevada - have shown
some improvement. Kuehl noted that he has been speaking before a variety of
NACM industry groups during the last few months and has observed some very
that have been struggling are those one would suspect: automotive and retail.
The growth sectors in medical and energy are reacting differently and may even
be in true recovery by this time. The overall energy sector has been growing, especially
in the area of alternative technologies. The entertainment sectors have also
been holding steady.
The manufacturing sector continues to improve slowly. While the index only
moved slightly from 44.4 to 45.3, that was enough to put it in a position not
seen since September 2008. The most improvement tended to show up in the
reduction of unfavorable factors, as favorable indicators basically were
unchanged from the previous month’s data. By most accounts the manufacturing
sector has just now shown some positive movement in May, and it is possible
that credit activity in the sector may have provided some advance warning.
report, complete with tables and graphs, and the CMI archives may be viewed athttp://web.nacm.org/cmi/cmi.asp.
CMI Signals End to Recession
June 1, 2009