If you've noticed customers taking longer to pay, you're not alone. The Credit Managers' Index declined slightly over the last month, dropping from 54.5 in June to 53.4 in July. That made July the fourth month in a row to show a decline, and the seventh over the past year. In fact, the index of unfavorable indicators dipped below 50 -- the level that separates expansions from contractions. "This is a precipitous fall, and it is unlikely that a reversal will be swift," says the National Association of Credit Management. The index is derived from surveys conducted by the National Association of Credit Management (NACM) with 900-some trade credit managers throughout most of the U.S.
"The problems besetting the economy earlier in the year have not abated, and now there are new ones emerging," the NACM reports. As a result, several elements of the calculation, such as sales levels and dollars collected, registered negative movements. The sales indicator actually is lower than it was during all of 2011.
While both the manufacturing and service sectors recorded unfavorable shifts, the changes were more pronounced in the service sector, which dropped from 55.3 to 54, the lowest level since late last year. A number of index components moved unfavorably over the past month, including bankruptcy filings, dollar amounts beyond term, and accounts place for collection.
The manufacturing index also dropped, although not quite as dramatically, declining from 53.6 to 52.8. Among the major movers within the index were negative shifts in sales (probably due to a slump in export activity, the NACM says), in new credit applications and in dollar amounts beyond terms.
Unfortunately, the NACM Index isn't the only sign of economic trouble. The Report to the U.S. Secretary of the Treasury from the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association (SIFMA), released August 1, starts with this sentence: "Since the Committee last met in early May, the pace of expansion has downshifted, as real output grew at only a 1.5% rate in the second quarter, following a 2.0% pace of growth in the first quarter." Among the factors cited for the drop in output are uncertainty about both the U.S. fiscal outlook and the European debt crisis.
The Advisor Confidence Index (ACI), a benchmark of the sentiments of 150 independent registered investment advisors, also fell in July, slipping almost 6% from the June level. Advisors' outlook on the current state of the economy, as well as their estimates for the upcoming six and twelve months, all turned negative. The only positive movement came in their outlook for the stock market.
Corporate directors also sound gloomy. The most recent survey of corporate director dropped 13.5 percent during the second quarter, according to the National Association of Corporate Directors. Less than half -- 49 percent -- of directors expect the economy to improve over the next year. The "results indicate that corporate directors' confidence in the economy is moving from cautious skepticism to increased concern," said Ken Daly, president and CEO of NACD, in a statement.
One group is sort of happy, however: consumers. The Conference Board Consumer Confidence Index inched up from 62.7 in June to 65.9 in July. Still, the index remains at "historically low levels," said Lyn Franco, director of economic indicators at The Conference Board. Consumers remain pessimistic about their earnings potential, with fewer consumers expecting an increase in their incomes.