CMI corroborates recession retreat

Source: PlantServices.com

Mar 19, 2010

U.S. gross domestic product (GDP) numbers are the best in over a year and a half, suggesting the recession is in clear retreat, according to the most recent numbers available from the National Assn. of Credit Management (NACM, www.nacm.org). After a mild recovery in the third quarter, numbers jumped almost 6% in the fourth. The bulk of this growth is attributed to manufacturers starting to replenish inventories, mostly since the beginning of December. This shift in strategy is reflected in the Credit Managers' Index (CMI) numbers, as well. "The jump in manufacturing was stark and unexpected and, since the decline registered in the last iteration of the index, there has been a major leap in some critical areas," said Chris Kuehl, Ph.D., economist for NACM. "The combined CMI saw a jump from 52.9 to 55.1, which is impressive enough, but the real movement came from the manufacturing side."

The latest figures mark the highest numbers seen in the index since February 2009, when the initial impetus of the recession was broken. Slow growth is likely to return, but the suggestion from this month's data is for substantial gains in the bulk of the first quarter. The strategy employed by most companies in the face of financial strain is to reduce costs to the barest of minimums, which involves slashing the workforce, postponing or eliminating capital expenditures and reducing inventory to the lowest possible level. On the manufacturing side, this inventory reduction extended such that, by year's end, supply was dangerously low.

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