NACM’s Credit Managers' Index Falls in June

This month’s Credit Managers’ Index (CMI) reading from the National Association of Credit Management (NACM) declined, leaving the reading barely higher than it was in April, but falling short of the positive signal sent by May's increase. The readings are still firmly in growth territory, but are now just not trending in the preferred direction. The services sector took the brunt of the impact, and the manufacturing sector did not budge, for the second month in a row.

After the readings last month, it was thought that the CMI would show continued progress, but the manufacturing sector was flat and the service sector experienced a very sharp decline—enough to drag the index down. "The drop was unexpected, which has suddenly become a common refrain as some other data releases are starting to show similar trends," said NACM Economist Chris Kuehl, PhD. The economy is clearly not out of the woods just yet, and the latest revision of first quarter GDP also came as a shock. "It now appears that the economy contracted by far more than originally reported," Kuehl said. "Add to this the latest data on durable goods and there is something amiss. Consumer confidence numbers have recovered to levels not seen since the start of the recession, but that renewed level of enthusiasm has not been enough to pull the economy forward, or so it would seem."

The damage was greater in the unfavorable categories, although the favorable factors saw some decline as well. The biggest drop was in sales, which is still higher than it was at any point since November of last year, but after last month's surge, it was hoped the trend would accelerate. Dollar collections dropped out of the 60s and amount of credit extended also slipped but stayed very close to the record highs of late. New credit applications improved, which could be good or bad news. "The problem is that there were more rejections of credit applications as well," Kuehl said. "When there are more applicants and more rejections, it is a signal that more companies in financial distress are seeking credit in the hopes that somebody will help them survive."

 A full report with graphs and sector breakdowns is available here.

- Jacob Barron, CICP, NACM staff writer

STS Roundup: Missouri, Colorado and Ohio

Missouri will have a new retainage statute starting in August after Governor Jay Nixon signed SCS SB 529 into law last week. Under current law contractors in Missouri must pay subcontractors and suppliers when they receive payment on a public project less any retention not exceeding 10% of the value. SB 529 lowers that retention threshold to 5%. It also provides that a public owner may retain up to 10% if the contractor is not required to obtain a surety bond on the project, which is to say if the value of the project is $50,000 or less. The new statute also provides that if a public owner determines that certain aspects of a public project are not substantially or satisfactorily completed, the owner must provide a written explanation within 14 calendar days to the contractor, which must then inform any subcontractor or supplier that might be held responsible. Failing to provide this notice means the public body must pay at least 98% of the retainage within 30 calendar days.

Elsewhere, in Colorado, on June 6, upon its signature by Governor John Hickenlooper, HB 14-1387 entered into force, instituting a number of different construction law reforms particularly focused on updating the state's laws on purchasing and maintaining public real property. The bill cleans up a number of inconsistencies in the existing statute and establishes procedures for a number of different bookkeeping, budgeting and certifying purposes, but additionally also raises the threshold at which prime contractors on public construction must provide payment and performance bonds from $100,000 to $150,000.

Finally in Ohio, new amendments to the state's public-private partnership (P3) authority approved by Governor John Kasich earlier this month have left subcontractor and materials supplier advocates disappointed. The changes, which enter into effect on September 14, require that prime contractors provide both performance and payment bonds on P3 projects, but also allow the state's P3 director to specify the amount of the bonds, meaning that entities further down the ladder of supply might not be covered, depending on the specified size of the bond. The amendments also stipulate that building and construction materials used in P3s are exempt from Ohio's sales and use tax.

- Jacob Barron, CICP, NACM staff writer

Mainstream Media Surface-Level Analysis Begetting Global Business Misconceptions

No matter the media outlet, there are certain conclusions that the bulk of US news consumers reach. Russia is in serious danger from a long-term business perspective. The United States is in a bad position and failing to thrive economically. Mexico continues to be a gang-controlled danger zone and, thus, will be held back from a business standpoint. China’s downturn should be worrying credit grantors. These, among other assertions and conclusions, would be hard-pressed to be further from the truth, said Kevin Hebner, ‎senior FX Strategist at JPMorgan.

While serving as an instructor at the inaugural year of NACM's Graduate School of Credit and Financial Management International (GSCFMI) last week, Hebner poked holes in all of these assertions to show that mainstream media's surface-level coverage often paints an incomplete or inaccurate picture.

Regarding the United States, Hebner suggested media coverage and, in some ways, consumer confidence is tainted by equating business conditions with the general disappointment with the effectiveness of the US Congress. "Washington, DC, fortunately, has been more of a spectator and doesn’t have much in the game right now," Hebner said. "The US is actually doing quite well." He called it the least-volatile economy in the world at present.

For more on this story, check out this week's edition of NACM's eNews.

- Brian Shappell, CBA, CICP, NACM staff writer

GDP Revised Down for First Quarter 2014, but Analysts Largely Unfazed

While a previous report painted a somewhat negative portrait of the US economy in the first quarter, the most recent data suggests that the reality was even worse. Real gross domestic product (GDP) for the US decreased at an annual rate of 2.9% in the first quarter of 2014 according to the Bureau of Economic Analysis' (BEA's) latest revision. The downward revision marks the first quarter of 2014 as the worst for the American economy since the recession ended in 2009.

A major driver of the broader GDP downward revision was a downward revision to consumer spending, primarily on services and specifically health care. Previously the BEA had estimated that health care spending had added 1.01 percentage points to the full GDP figure for the first quarter of this year, but revised it down so that it was actually reduced by 0.16 points. Many believe this reflects the changing nature of health care spending in the wake of the Affordable Care Act (ACA) taking effect as of the first day of 2014. The BEA's preliminary estimate suggested that health care spending was increasing, but now it appears that it did the opposite.

Although health care was the main culprit of the downward revision, elsewhere in the economy things weighed negatively, particularly a downward revision in exports combined with an upward revision of imports, squeezing the GDP to lower numbers from both sides. Corporate profits for Q1 of 2014 also declined by 9.1% at a quarterly rate, amounting to a whopping $198.3 billion drop, after increasing by 2.2% in the last quarter of 2013, putting further pressure on the economy in the beginning of the year.

Despite the dramatic nature of the latest figures, economists appear to be taking the 2.9% negative growth rate in stride and still predict much higher growth for the second quarter, which ends next week. Led chiefly by the weather-related issues that dogged the economy in the first quarter, as reflected in the February Credit Managers' Index (CMI), many analysts wrote the sharp decline in GDP off as the result of a unique set of circumstances and noted that other indicators released in the first quarter, and more recently, continue to point toward stronger growth moving forward.

- Jacob Barron, CICP, NACM staff writer

Ex-Im Faces New Threats after Cantor's Loss

Political observers were stunned after House Majority Leader Eric Cantor (R-VA) lost his primary to Tea Party upstart David Brat, but the ensuing rearrangement of the House leadership in the wake of Cantor's departure could wind up being the bigger story, at least for advocates of international trade.

The House of Representatives elected Rep. Kevin McCarthy (R-CA) to replace Cantor as the GOP Majority Leader. McCarthy is a staunch conservative but his political identity seemingly straddles the line between Tea Party stalwart and establishment Republican. Nonetheless, one of his top policy priorities has been to shutter the Export-Import Bank of the US (Ex-Im). In recent interviews the newly-elected Majority Leader has stated that he believes Ex-Im's charter should be allowed to expire, and that the Bank occupies a void that could easily be filled by the private sector.

A number of conservatives have leveled similar charges at the bank, arguing that it isn't the government's responsibility to function in a space where a workable private sector alternative exists and also that Ex-Im's activities operate as a form of corporate welfare for the nation's largest companies. Nonetheless, a number of typically lockstep conservative groups are lining up to support Ex-Im, whose mission has always historically been to operate and support export sales that private lenders wouldn't touch if their futures depended on it.

The US Chamber of Commerce and the National Association of Manufacturers (NAM) earlier this week announced a coalition urging Congress to act swiftly to reauthorize Ex-Im before its charter lapses on September 30. "With Americans overwhelmingly focused on the need to create jobs and grow our economy, business owners are understandably perplexed by the inside-the-Beltway campaign against the Ex-Im Bank," said US Chamber President and CEO Thomas Donohue. "In particular, the thousands of small businesses that depend on the bank to be able to access foreign markets are stunned at the threat that Washington could let its charter lapse. However, we won’t let that happen."

- Jacob Barron, CICP, NACM staff writer

In Honor of NACM's Birthday, A Look Back at the CMI’s Accurate Predictions

One hundred and eighteen years ago today, America’s credit managers heard O.G. McMechen’s call to create a national association for business credit management, resulting in the formation of the National Association of Credit Men, which would eventually grow to become the National Association of Credit Management (NACM). It was McMechen’s hope, and that of all the 62 business leaders that gathered in Toledo, Ohio that Tuesday nearly 118 years ago, that by sharing information, the commercial credit profession in the United States could address the threat of widespread business credit fraud, most commonly perpetrated at the time through the secret sale of goods in bulk, and enhance the abilities of business credit managers nationwide through the sharing of their expertise.

That expertise has only grown deeper and deeper over the last 118 years, benefiting the American business economy in ways that McMechen could never have predicted. One of the most poignant is through NACM’s Credit Managers’ Index (CMI), which is nothing less than the distilled insight and economic perspective of today’s commercial credit manager packaged into a remarkably accurate forecasting tool used by some of the world’s largest organizations and economic regulators. To celebrate NACM’s 118th birthday, here are just a few examples of when its flagship index proved the value of the business credit manager’s insight by accurately predicting the economic future.

Early Success
Right from the jump, the CMI proved to be an accurate predictor of GDP as reported on a quarterly basis. The first reading, posted for January 2003, indicated a slight 0.2-point improvement in the total combined CMI, with a larger 1.1-point increase in the service sector offsetting a decline in manufacturing, which suffered a loss of 0.6 points. A quarter later that year, according to the US Bureau of Economic Analysis’ (BEA’s) revised final figures, US gross domestic product growth moved from 1.4% in the first quarter of 2003 to 3.3% in the second, reflecting the CMI increase which grew in February 2003 as well, driven predominantly by sales increases. Similarly, in January 2005, the CMI saw a decline from 55.0 to 52.7, a drop chalked up to seasonal influences that didn’t dim respondents’ outlooks, as they predicted continued growth. Sure enough, first-quarter growth in 2005 of 3.8% gave a little in the second quarter of the same year, to 3.3%, suggesting, as the CMI did, seasonal influences that weren’t strong enough to throw off what was at the time a growing economy.

Bankruptcy Figures and Individual Factors

Digging into the CMI’s four favorable factors and six unfavorable factors, which are combined to create the full CMI, can also reveal powerful indicators that illuminate very specific sections of the business world. Bankruptcy figures are less an indicator of economic strength or weakness than a reflection of bankruptcy viability and other factors, but nonetheless, increases and declines are often reflected in the filing for bankruptcies factor, included in the CMI’s unfavorable factors. Recently an uptick in month-to-month commercial filings in February 2014 was indicated in the factor’s slip from 60.5 in January to 58.5 in February. (The neutral line for the CMI and its individual factors is 50. A number above 50 indicates expansion, while one below 50 indicates contraction.) Other measurements of cash flow and purchasing behavior can also find echoes in some of the CMI’s individual factors like amount of credit extended and new credit applications, among others.

The Great Recession

Three months before the official start of the Great Recession in December 2007, the September 2007 CMI edged up only slightly to 54.3 following a sharp 1.3-point drop in July and a 0.2-point decline in August. Nonetheless, uneasiness set in and October’s decline to 54.1 continued a downward trend that essentially predicted the recession. Eighteen months later in June 2009 the deepest recession in recent history ended, but positive news could be seen in the CMI as early as February of that year, with a slow trickle upward that correctly predicted the country’s very tentative return to economic growth that summer.

Ultimately all of these examples of the CMI’s power are examples of the value of credit professionals, whose responsibilities focus on what’s next, in addition to what’s happening right now. “I think it’s the nature of credit management,” said NACM Economist Chris Kuehl, PhD. “Credit managers are as concerned about the condition of their clients 15, 30, 60 and 90 days from now as they are today. The tendency is to think ahead."

- Jacob Barron, CICP, NACM staff writer

Disputes Normal for First Half of 2014 According to June NACM Survey

One of the wrinkles in the unfavorable factors portion of the May Credit Managers' Index (CMI) was a perplexing deterioration in disputes. "It may indicate that there is a stronger desire to adjust credit arrangements as companies anticipate a period of better growth," said NACM Economist Chris Kuehl, PhD, explaining the sharp decline from 54.7 to 50.2 in May's disputes reading. "It may also reflect the impact of the first quarter slump and the temporary nature of that economic dip."

By and large, however, 2014 has been par for the course when it comes to disputes for most credit professionals. When asked in NACM's June Survey "Over the first half of 2014 have you or your company experienced an increase in customer disputes?" only about a quarter of the respondents answered "yes." The remaining 73% hadn't seen any noticeable rise in disputes this year, with many reporting in the comments that disputes and deductions were at levels comparable to 2013.

As ever, the CMI is a forward-looking indicator and often reflects developments in the economy one to three months ahead of time. The May CMI's rapid drop in the disputes figure, signaling an increase in actual disputes, could suggest that credit professionals can expect to see more disputes in the back half of 2014. In fact, a number of survey respondents mentioned in the comments that they expected to see disputes creep upward, just as the CMI suggested, for various different reasons.

"We just went to an automated cash application process in May, so I expect to see an increase due to this process, until we can work the bugs out of it," said one participant. "We have more pricing issues with a new pricing system," said another.

Others noted that their dispute increases were driven by customers continuing to plead ignorance. "We get disputes over service charges and they are increasing," one respondent reported. "Usually it is the excuse 'I didn't receive.' Lately we have been sending the invoices with the statement to ensure it's received. We still hear the excuse, even when they call about the statement that was included with the invoices."

Cash flow issues seemed to be generating disputes for many other survey participants too, as belt-tightening buyers try to cut down on their expenses as drastically as they can. "I've seen an increase in customers holding payment for the whole invoice versus the disputed portion," said one respondent. "I have to believe this is due to cash flow issues. If they can find anything that is incorrect they just aren't paying any portion of it, nor are they contacting us to resolve it. They wait for us to call and follow up when the invoice is past due."

Look for a new NACM Monthly Survey in July. In the meantime, if you haven't already, be sure to take this month's CMI survey which closes today at 5pm EST.

- Jacob Barron, CICP, NACM staff writer

The Fed and How its Mid-Recession Actions Affected Post-Recession Corporate Restructuring

Commercial bankruptcy filings continue to languish at historically low levels, and are expected to do so at least until the Federal Reserve begins to raise interest rates. In the meantime, however, an article published in the June issue of the ABI Journal investigates the effect that the Fed's extremely accommodative post-recession monetary policy has had on corporate restructuring and credit markets in general.

In "Fed Policy Regulation's Impact on the Restructuring Industry," authors James Doak of Miller Buckfire & Co. LLC and Steven Argan and Alan Dalsass of MorrisAnderson wonder whether federal government actions taken in the wake of the financial crisis have fundamentally altered the landscape of corporate restructuring.

Doak, Argan and Dalsass note that during the recession, restructuring professionals believed, not without cause, that a rash of bankruptcy cases would logically appear just around the corner. "Throughout 2009, this proved to be true," they said. "What had started in the financial sector was spreading. The restructuring community rolled up its sleeves and set to work to fix/sell/dissolve/untangle the mess. There was the feeling that if you were not already up to your ears with work, you need only wait. The next wave was surely coming."

The expected deluge quickly dried into a drip, however, as the Fed, the Treasury and government agencies sprung into action to stabilize the financial system. Most notably the Fed quickly lowered its target rate, but, working in conjunction with the Treasury, also resurrected several programs designed to be temporary solutions to the problem of a lack of credit availability and lending. "These programs also amounted to trillions of dollars of new capital into the financial system, which, however necessary it seemed at the time, disrupted market dynamics in a way that continues to have persistent, unintended consequences today," they said.

Read more about how the Fed's mid-recession emergency measures will continue to effect trends in corporate insolvency in this week's edition of NACM's eNews.

- Jacob Barron, CICP, NACM staff writer

NACM Credit Congress 2014: Cybertracking Increasingly Important to Collecting

A number of well-attended sessions at this year’s Credit Congress dealt directly with the use of the Internet and technology to track down information on debtors and/or protect today’s credit departments from scams. And it seems like credit people don’t realize just how much is out there for them…and for free.

Ron Brown, of CSI Group/Eagle Group XX, told attendees during two sessions that anyone who thinks they have true, guarded privacy in the modern era is dead wrong. “If you give me your name and town you live in, within 3 minutes I can have you address and social security number,” Brown said. “Within 10, I can find out what you paid for the house, how many bathrooms you have. Within a couple hours I can have every account number you have…” While scary, it also means those working in credit and collections are able to obtain more information than ever before.

Brown said most people know to use things like social media stalwarts Facebook and Linked In as well as Google searches, but he listed dozens of additional sites where information is easy to attain and free for anyone with an Internet connection (These can still be found in the Handouts section of the new Credit Congress mobile app). But many are sort of like industry secrets for those “in the know.”

“The Internet is a great tool for cybertracking…you can do it 24 hours per day, seven days per week,  365 days per year if you want to, and from any location or with very little knowledge,” Brown said.  There are some things to avoid, however, such as not double-checking your sources or doing things like trying to friend someone using a fake profile (that counts as attempted contact in the eyes of the law). It also is considered unethical in most quarters. 

Another popular suggestion was using features like Google Earth, which allows you to get an actual street view of something like a shipping address just to make sure you’re not be scammed (RE: will be eventually unable to collect). After all, if a business’ shipping address looks like a one-story house when you were lead to believe they had an office or warehouse, you may have a problem.

- Brian Shappell, CBA, CICP, NACM staff writer

NACM Credit Congress 2014 Fed Unveils Preliminary Findings of Payments Study for First Time to NACM Membership

As noted throughout Fall 2013, the Federal Reserve’s Financial Services Division reached out to the NACM membership for the trade credit perspective while crafting solutions to improve the entire US payment systems. On Wednesday, at Credit Congress in Orlando, the Fed presented some initial findings for the first time to date, findings that indicate businesses overwhelmingly believe the US needs to evolve in its payments systems…and fast.

“The US from a payment perspective is starting to fall back a bit,” said Dan Gonzalez, from the Federal Reserve Bank of Chicago. “A number of other countries have already started to put into place new payment methods.”

The survey conducted through the Fed last Fall/early Winter, which a number of NACM members participated in, showed the following results, among others.
  • 67% of businesses won’t use a payment method unless it is widely accepted (which intimates that it is hard for new payment methods to emerge).
  • More than 80% want much faster, almost immediate notification/tracking when a payment is made or received, though businesses almost universally valued security over speed.
  • Broad support for the Fed to have more activity (such as developing and implementing hard standards on payments) to improve the US payment system.
  • Merchants expressed desire for payment system governance structure that allows them to have more influence.
  • 81% of business indicated that they would rather share and email address or a phone number to make/receive payments. When making a payment, not having to give bank account information to the payee is important. (Re: People want to mask their information).    
  • 75% of businesses (compared to only 33% of consumers) are willing to pay a few for faster availability/clearance of payments.

Two areas received little interest from Fed survey respondents: improvements to traditional (hard/paper) check enhancements and focus on international payments. Within checks, Gonzalez noted their use represents a “downward trend as far as payer-use goes,” even though it remains a big part of the US payment landscape, from a percentage basis, for now. But it seems to be clearly on the way out as technology advances. Per international payments, respondents showed a desire to “worry about our domestic house first,” as Gonzalez described. Among other issues, because there are so many financial institutions and diversity/complications among them, people just don’t want to spread the focus too much outside of the border at the moment. It’s more of a “keep an eye on it” area than a priority, Gonzalez told Credit Congress delegates.

- Brian Shappell, CBA, CICP, NACM staff writer

ABI Chapter 11 Reform Commission Offers Progress Report at NACM Credit Congress

The work of the American Bankruptcy Institute (ABI) Commission to Study the Reform of Chapter 11 continues, and will continue until its final report is issued later this year. Attendees of NACM's 2014 Credit Congress, currently underway at the Rosen Shingle Creek Resort in Orlando, FL, got a look behind the curtain however, as an elite group of Commissioners and Commission Committee leaders gathered to provide the trade credit community with a status report rich with insight.

Moderated largely by Professor Michelle Harner, the Commission's reporter, the session illustrated the depth and breadth of the Commission's work, as well as the value of the commercial credit industry's input and the seriousness with which it's being treated by the Commission. Despite not actually being a Commission hearing like the one hosted at last year's NACM Credit Congress in Las Vegas, the Commission received even more insight into the trade credit world's opinions on the Chapter 11 systems extant flaws. Harner played the role of both moderator and recorder as she took down copious notes during the lively discussion between the panel and the credit professionals in attendance and also gave attendees her contact information so that they can share their thoughts with her regarding the Commission's work that will eventually yield a set of policy recommendations to reform Chapter 11 in a way that makes it more effective for all parties involved.

Panelists included Co-Chairs of the Commission's Avoiding Powers Committee Bruce Nathan, Esq. and Ronald Peterson, as well as Commissioner Geoffrey Berman, who joined the program via Skype. Despite carefully avoiding any specific policy recommendations that the Commission might eventually make, the session was a highlight of Credit Congress' Tuesday afternoon educational program, featuring lively back-and-forth dialogue and deep, eye-opening discussions of the greater issues that surround the trade credit community's biggest gripes with the Chapter 11 process, and the interconnectedness of these issues that makes revising the Bankruptcy Code such an enormous, worthy task.

Credit Congress continues in Orlando. Stay tuned to NACM's publications now and throughout the year for more on the fascinating issues raised during the session and more on how the Commission eventually shapes its policy suggestions.

- Jacob Barron, CICP, NACM staff writer

NACM Credit Congress 2014: To Get (Or Not to Get) Financials

A buzz topic that came up repeatedly during Tuesday’s education sessions of the 118th NACM Credit Congress in Orlando was financial statements. But, expert speakers agreed with little deviation that it usually worth the effort to try to get them and, importantly, to actually read/review/understand them.

“If you can get financials, always do,” said Ed Bell, PhD, ICCE, of Grainger Inc. “Even if you have to sign a non-disclosure agreement, among other things, do it. There really is no substitute.” He reminded attendees, however, financials may not be the whole story…and there are plenty of ways to improve your credit-granting decisions without them. Bell said so much information could be gleamed from outside credit agency information, following current events and more frequent contact.   In a simultaneous education session, Deborah Thorne, Esq., of Barnes & Thornburg LLP, extolled the virtues of visiting a customer, primarily if your company is dependent on a part/component they supply to you.

“If there are four people working and they usually have or look like there should be 50, you know there is a problem.” She added that getting access agreements in place at the beginning of a relationship, “when everyone is still friendly,” is a good idea.

For those who are successful in garnering financial statements an important lesson, that one would think to be obvious, is actually reading and analyzing them, said NACM Chairman Toni Drake and Lynette Warman, Esq. But that so often does not happen, and the statements end up in a drawer.

“It does not do you any good if you don’t actually read them first,” said Warman. “If you didn’t check them out, they weren’t germane to your credit decision, and you won’t be able to convince a judge it was...I know you’re busy, but do things like check that the person actually owns their property they listed. There are a lot of people who just list property thinking you’ll never check it out." 

Brian Shappell, CBA, CICP, NACM staff writer
Check back here and at our Twitter handle (@NACM_National) throughout the week for more on-site coverage of the 118th Credit Congress, which is officially underway from Orlando.

NACM Credit Congress 2014: General Session Kicks Off Educational Program, Recognizing Excellence and Credit's Value

NACM's 2014 Credit Congress kicked off at the Rosen Shingle Creek Resort in Orlando, FL this morning with the Annual General Session. After NACM National Chairman Chris Myers welcomed this year's attendees, the program began with the annual presentation of NACM's Honors & Awards, which recognize excellence in commercial credit management and credit education.

Gary Gaudette, CCE, ICCE was named the O.D. Glaus Credit Executive of Distinction, one of NACM's highest honors. Ever humble, Gaudette said he was "amazed" that someone would think to nominate him.

"For me, this is a huge honor. I think an award like this is validation that you’re trying to do the right thing in your career," Gaudette said. "I hope I’ve helped people and maybe inspired some people I work with and have informally mentored."

The following NACM members also earned honors and awards at this morning's program:
--CCE Designation of Excellence: Pamela Craik, CCE
--CBF Designation of Excellence: Myra Kingstad, CBF
--CBA Designation of Excellence: Sheryl Rasmusson, CBA
--Mentor of the Year: Patrick Spargur, ICCE
--Instructor of the Year: Jeff Hawkins, CCE
--NACM Student of the Year: Angie Monroe, CBF
--Graduate School of Credit and Financial Management Student Leadership Award: Doug Faust, CCE

NACM congratulates all of this year's award winners and thanks them for their contributions to the credit profession and to their fellow credit managers. Stay tuned this week and throughout the year to NACM's publications for more information on this year's winners.

The 2014 General Session also included a presentation by former ATF investigator, CEO of the Body Language Institute, international trainer, speaker and author Janine Driver  that was by turns laugh-out-loud hilarious, startlingly eye-opening and deeply personal. "I think the credit managers are one of the most undervalued people at any company," Driver said. "You're the front line; you're the relationship line from our companies. It's you guys that make the difference."

Driver eventually roused the audience to a lengthy standing ovation after her presentation, in which, using credit management industry terms that every attendee understood, she provided them with a number of practical, real-world, scientifically-based communication tools and tips that they could put to work right away at their companies. It was an inspiring start to an event that represents the largest gathering of commercial credit professionals, who come together each year to learn and network and grow in a way that allows them to increase their ability to perform their vital, undervalued work for their companies, and for the American economy at large.

- Jacob Barron, CICP, NACM staff writer, and Brian Shappell, CBA, CICP, NACM staff writer

Check back here and at our Twitter handle (@NACM_National) throughout the week for more on-site coverage of the 118th Credit Congress, which is official underway from Orlando.

West Virginia Lien Law Changes In Effect Today

In West Virginia, June 6 marks the effective date of change to the 1931 Code of West Virginia in which it becomes a full-price lien state, instead of an unpaid balance state, for commercial and certain residential projects. Residential owners will not be indebted to a contractor when the property is an existing single-family home, if the residence in question is a new owner’s primary residence or if the property is an owner-occupied single-family dwelling. Also, according to the statute, “This subdivision does not apply to a developer or builder of multiple residences except for the residence that is occupied as the primary residence of the developer or builder.”

“States with unpaid balance lien laws require an extra level of diligence for suppliers and contractors,” said Chris Ring, of NACM’s Secured Transaction Services (STS). “These parties can't rely on a definitive date of last furnishing to file their lien because the lien is limited to funds remaining to be paid on a general contract.  Because these parties are often not aware of when draw payments are cut, they are often forced to consider filing their lien well before a date of last furnishing.  This is especially problematic for trades that are last on the job, such as flooring, casement and paint.”

- Brian Shappell, CBA, CICP, NACM staff writer
Other recent lien-related stories from Arizona and Pennsylvania are available now for members of NACM's Secured Transaction Services website at www.nacmsts.com. And during next week's Credit Congress in Orlando, STS' Chris Ring will serve as speaker during the Building and Construction Executive Exchange Sessions on Monday as well as two other educational sessions during the week. For more information on Ring's session and the overall event, go to your the app store of your cell phone or mobile device and download NACM's free and brand new Credit Congress app.

May Commercial Bankruptcies Continue Decline

On both a year-over-year and a month-to-month basis, commercial bankruptcies notched notably lower figures in May. Total business filings last month decreased to 3,190, representing a 21% decline from the 4,055 business filings recorded in May 2013, according to the American Bankruptcy Institute (ABI), who collects bankruptcy filing data with Epiq Systems, Inc.

May's commercial filing total also represented a 6% decrease from the April 2014 commercial filing total of 3,387. Commercial Chapter 11 filings took an even steeper dive as they experienced a 21% decrease in May 2014 to 429 filings, down from 540 filings in May 2013 and 38% lower when compared to the 687 filings registered in April 2014. "Bankruptcy filings continue to nose dive in the current environment of sustained low interest rates for business borrowers and lower than expected consumer spending," said ABI Executive Director Samuel Gerdano. "As these conditions persist, bankruptcy filings will continue to decrease."

Total filings, meaning consumer and commercial cases, decreased 11% in May 2014 over May of last year, from 96,495 to 85,664. They also declined by 3% from April 2014 to last month as well.

On a per capita basis, meaning total filings per 1,000 per population, the bankruptcy filing rate actually managed to register an increase to 3.13, which is higher than the 3.09 rate registered in the first four months of 2014. Average total filings per day in May were 2,763, an 11% decrease from the 3,113 total daily filings in May 2013. States with the highest per capita filing rates in May 2014 were Tennessee (6.30), Alabama (5.26), Georgia (5.25), Illinois (5.03) and Utah (4.96).

- Jacob Barron, CICP, NACM staff writer

US, UK Carries Global Manufacturing PMI to May Increase

The United States reported its sharpest rise in production levels since February 2011, while the United Kingdom and Czech Republic also ran near peak performance levels during May, according to statistics released this by Markit Economics. However, there were only a few other significant examples globally of hot or even mildly encouraging growth.

The Global Manufacturing PMI, produced jointly by Markit and J.P. Morgan, increased to 52.2 from April’s six-month low of 51.9. This was helped dramatically with the full-point rise of the Markit US Manufacturing PMI to a level of 56.4. Markit noted that categories nearly across the board in the US “signaled a robust improvement in overall business conditions.”

Not surprisingly, China continued to show some struggles and continued “marginal deterioration” of conditions in May even though its statistics improved, said HSBC. The HSBC China Manufacturing PMI moved to 49.4 in May from the previous reading (48.1). But the story here is that indicators of ongoing health of the manufacturing sector continue to foreshadow a major decline for Chinese manufacturers.

What was more surprising was the backslide of the previously recovering European Union. The Markit Eurozone Manufacturing PMI slid to 52.2 from April’s 53.4. It represented the worst performance in six month and failed to reach even the flash estimates released between the two set of final statistics. The only major EU economies showing a rise were Spain, which reached a 49-month high, and the Netherlands, whose increase was considerably less noteworthy. Meanwhile, Germany fell to a 7-month low and, troublingly, France fell back into contraction territory.

- Brian Shappell, CBA, CICP, NACM staff writer

Rise of the Radicals in Europe Will Hurt Trade Deals with the US

The disgruntled voters of Europe have sent a shot across the bow of the mainstream in the region. The European Parliament has nothing like the powers of the national governments, but it has influence nonetheless, and it is now populated with the skeptical extremes of right and left.

Nationalism is on the rise and in all its varieties. This is not good news for those who are advocating a new set of trade deals with the United States. The attitude in Europe is not supportive to begin with, and this simply pushes resistance further. Anything that seems to give the US an edge will be fought tooth and nail, and the US is not looking for a deal that doesn’t provide it some benefit. The negotiators will soldier on and there will be declarations of progress from time to time, but the reality is that nobody is in a position to make much of a concession to anyone else.

The US trade policy is in tatters right now and is unlikely to be rescued. The agreements with the Pacific nations are being held captive by the Democrats, as they do not trust these deals even as they agree that China needs to be hemmed in. The European deal was in trouble anyway, as France threw up a wide variety of barriers. The rise of the National Front, UKIP and the other parties of the one-time fringe will make this process all the more challenging

- Chris Kuehl, PhD, Armada Corporate Intelligence