Despite favorable indications earlier this year, improvement to the Credit Manager's Index in August was weaker than expected – an indication that some sectors of the economy are still struggling.
The seasonally adjusted index for August increased to 48.1 from 48 in July, virtually unchanged following six months of solid gains, according to a report by the National Association of Credit Management.
"The credit system has not healed and it may be some time before there is a sense that the biggest issues are behind the economy," Chris Kuehl, the association's economist, states in the report. "It is mildly encouraging to note that the index has not fallen, but an anemic 0.1 gain was much less than had been anticipated."
The index, a gauge of economic factors affecting credit and collection professionals, was down 2.6 points from 50.7 in August 2008. Any score below 50 indicates economic deterioration. The index consists of four favorable factors, such as sales and the amount of credit extended, and six unfavorable factors, such as accounts placed for collection and bankruptcy filings.
The issue, according to the report, continues to be the confidence levels of the consumer and the investor. The investment community is more encouraged than the consumer, but there is nothing to suggest that producers should start gearing up again until consumers begin to draw on the rebuilding inventory levels.
"Overall there were more down sectors than positive ones this month," Kuehl states. "There is a small amount of solace to be taken in the observation that none of these areas declined a lot, but growth was expected."
The biggest improvement was in the number of bankruptcies, according to Kuehl, but that might be connected to the fact that most of those companies threatened with collapse already have been forced into that procedure.