The appetite for gambling in the United States is one of those things that never seems to fall out of fashion. And, while there has been quite a boom in the Eastern U.S. for legalization of gaming operations in recent years, the surge could cause some operators to eventually go bust to the surprise of some flat-footed creditors.

Maryland is just the latest state to allow, by voter referendum in this case, expanded gaming operations at several sites throughout the state, which will include table games as well as “slot-parlor” offerings. Ohio is a recent player in the market, too, with several operations. This adds to relative newcomers in recent years like Pennsylvania (there are at least three casinos running within the borders of Philadelphia alone), West Virginia and Delaware, not to mention the many longtime operators of Atlantic City, NJ and a couple on Native America land in Connecticut.  What does that mean to suppliers of everything from gaming machines to carpeting to food services to cups for beverages that end up in these casinos? It means there is plenty of competition and real potential for market saturation, according to Patrick Spargur, ICCE, credit & collections manager with Bally Technologies Inc.

Large appetite for gaming or not, some operators likely will face the reality that there is not enough demand for everyone to thrive or even survive without solvency issues. Spargur, who will moderate the May 22 FCIB-designed educational session “Working Capital Management & Cash Forecasting” during Credit Congress in Las Vegas, told NACM some that he believes some companies will indeed face danger because of the high number of operators.

“There’s just a lot more competition in the surrounding region, and it’s major competition,” Spargur said. “Analysts I follow say, in Atlantic City alone, three to five properties need to be either shut down or converted into boutique hotels. There are too many players: Ohio is pulling [customers] from Pennsylvania; Pennsylvania is pulling from Atlantic City; West Virginia is pulling from Pennsylvania.”

In short: the spreads for various legal casino operations are going to be different from place to place and need to be monitored like a hawk by credit departments of direct suppliers to them and those upstream alike. It serves as a reminder that is critical to know an industry well, beyond overall numbers for a large region.

-Brian Shappell, CBA, NACM staff writer

Industries to Watch is a new feature of NACM’s blog (first run) and eNews. It will be a semi-regular look at areas where business credit professionals need to be focusing on for potential solvency issues because of a bevy of reasons (supply glut, government regulations or policy changes, dropping demand, etc.).

The latest edition of the National Association of Credit Management's (NACM's) Credit Managers' Index (CMI) marks its 10th-year anniversary of providing financial professionals, economists and policymakers with a startlingly accurate forecasting tool.

Since its inception in January 2003, the CMI's methodology has undergone a number of revisions, but never stopped being an immensely powerful economic predictor. In 2007 it was even able to tip analysts off to the start of the "Great Recession" in December 2007, showing a noteworthy decline in October of the same year.

Throughout the recession, the CMI reflected a remarkable sensitivity to the intricacies of the economic downturn, and resisted the month-to-month swings that characterized other economic indicators. Eventually it anticipated the recession's end as well, showing signs of market stabilization and nascent growth as early as February 2009, while the actual recession came to an end four months later in June.

The CMI's strength as a forecasting tool comes from the insight of credit and risk management professionals, whose responsibility it is to know what's coming next. "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."

Moreover, the structure of the CMI survey eliminates the opportunity to speculate. Other economic indices ask respondents what their company intends to do in the coming months, but intentions don't always align with reality. "As soon as you start getting into that kind of conjecture, you kind of weaken the data," said Kuehl. "When responding to the CMI question, 'Do you have more credit applications?' there isn't a lot of room for interpretation. You're getting responses that have to do with credit applications and the status of accounts, and most of that stuff is oriented to the future."

Over the last decade these factors have combined to create an unrivaled forecasting tool that's relied upon by those in the highest levels of finance and economic policy. As participation continues to grow and people continue to recognize its value, the CMI looks poised for another winning decade.

For more on the CMI, or to participate, click here.

- NACM staff
 

The January Credit Managers' Index (CMI), published by the National Association of Credit Management (NACM), dipped slightly as it painted the picture of an economy in transition.

To find the kind of variety found in the most recent edition of the CMI, one would have to travel all the way back to 2008, in the months that preceded the slide into the recession. For every sign that things were deteriorating at that time, there was a part of the index that looked solid and unaffected by the impending crisis. Now, however, that transition is showing again, but seems to point in the opposite direction: for every factor suggesting that the economy is still in the doldrums, there are one or two other factors that point to better days ahead.

For example, while sales improved in this month's report, new credit applications declined, signaling potential trouble ahead. "The number for new credit applications is important in that it tends to anticipate the gains some of the other factors will have later,” said NACM Economist Chris Kuehl, PhD. “If there is not much in the way of new credit activity, it is a signal that fewer companies are in expansion mode."

The complete CMI report for January 2013 contains more commentary, complete with tables and graphs and individual data for the manufacturing and services sectors. CMI archives may also be viewed on NACM’s website.

-NACM staff

The recently named keynote speaker FCIB’s International Credit and Risk Management Summit , to be held May 12-14 in Prague, intimates in a late January interview with NACM that it is unfair and/or misleading to continue looking at member of the BRICs nations (Brazil, Russia, India, China) as a group, since the nations demonstrate more and more how little they have in common.

“You cannot talk about emerging countries, like the BRICs, as a group—It doesn’t work this way anymore,” said Ludovic Subran, chief economist at Euler Hermes. “You’d never talk about the U.S. in a regional context with Canada.”

In addition, the nations also are in a pattern where they are struggling, and failing, to maintain its white hot growth rates of the past few years. At this point, the individual nations that comprise the BRICs may have to reinvent themselves somewhat, as notable by India’ s move to diversify the economy and finish of free trade agreements to bolster opportunity.

“The BRICs are so 2005…They’ve reached their limits in growth rates,” he said of over-emphasis on BRICs members by the international business community. “Now the question is how they are each going to handle it. What’s next?”

-Brian Shappell, CBA, NACM staff writer

(Note: Look for the extended version of this story in the new edition of NACM eNews, available via email and the NACM website late Thursday afternoon. For more information on FCIB’s conference, visit http://www.fcibglobal.com/icrms-2013).

Credit professionals find “pay-if-paid” clauses within contracts, especially construction industry-based ones, to be quite the headache at times. It’s why keeping a mindful eye on them ahead of time (re: before granting credit to a would-be debtor) is so important.

Greg Powelson, director of NACM Secured Transaction Services (STS), which administers the Mechanic’s Lien and Bond Services division, has long argued that taking “I’ll pay when [or if] I get paid” as an answer to a collections attempt or something in a contract as “crazy” and unacceptable. Powelson reminded creditors of the importance of reviewing terms to find such unacceptable clause inclusions.

“It’s always scary when court decisions against 'pay-if-paid' are revisited, and it always has to be fought. They’re going to use it again [if a debtor succeeds in getting previous court decision overturned],” he said. “Regardless of enforceability, it’s important to review purchase orders and subcontracts and crossing these terms out of the contract. These kinds of things simply must be identified before extending credit.”

It speaks to the difficulty of navigating the mechanic’s lien process without the potential for a costly gap for businesses extending credit. “Because of the unique nature of mechanic’s lien statutes, all sorts of issues come up from time to time that make things more difficult than they have to be,” Powelson said. “Even if something is unenforceable in the end, credit managers could find themselves expending legal fees to support a position already well-supported by case law.”

It's worth noting the "pay-if-paid" fight is on again, right now in the 10th Appellate District Court of Appeals in Ohio (see tomorrow's eNews edition for more on this story at www.nacm.org).

-Brian Shappell, CBA, NACM staff writer
 

Though a number of favorable factors that help comprise the National Association of Credit Management’s Credit Mangers’ Index (CMI), problems with sales ultimately outweighed the positive toward the end of 2012.

The CMI, available Friday afternoon (see link at bottow of story), will show a slight decline for the month largely on disappointing sales figures. NACM economists Chris Kuehl believes this reinforces the notion that business is stalled out in anticipation of what might happen with spending and taxation next year. There was some cautious optimism just one month ago in the CMI, but that optimism has seemingly evaporated, as it seems all but certain that there will be no settlement of lasting value on the “fiscal cliff” issue paralyzing Congress and the Obama Administration.

Other favorable factors statistics were not expected to register the same level of distress, even though a few small declines were expected. Additionally, the unfavorable factor index for December will show only a slight decline. The overall sense is that this month’s decline is due to the tensions existing among (and caused by) federal lawmakers. The inability of Congress and the president to make a deal has already cost significant economic growth, and it is now anticipated that real decline in GDP growth will be the next outcome.

“The reaction captured in this month’s CMI shows a stark lack of confidence as opposed to anything substantial,” said Kuehl. “The overall news for the economy has been pretty good, and so it is with much of the CMI. The factors most connected to mood and confidence are the ones slipping. The whole business community seems to be in state of suspense.”

The complete CMI report for December 2012 contains more commentary, complete with tables and graphs. CMI archives may also be viewed on NACM’s website.

-NACM staff

The latest iteration of the Credit Managers’ Index showed a return to form in some key factors, and jumped almost a full point from where it languished in October. November’s 55.2 reading is still shy of the high points reached back in February and March (55.8 and 56.2, respectively), but is back to the levels seen in August and September. When the reading from October fell to 54.4, there was a sense that it may have been an anomaly, and not as dangerous as it would appear. Now that assessment looks more accurate.

The most important jump was in sales, which climbed from 57.4 to 60.4. It is always encouraging to see the data cresting past 60, and this marks the best sales month since August when the reading was at 62. However, the best improvement in the favorable factors was in dollar collections, as it improved from 54.6 to 61.3. That is an impressive showing by any measure, and suggests that companies are seeing enough improvement in revenues to start catching up on their debt.

There was slightly more volatility in the unfavorable categories, causing a decline in the overall unfavorable index. Every indicator except dollar amount beyond terms, which rose from 48 to 49.9, slipped. Rejections of credit applications fell from 52 to 51.1—not a major reduction, but a signal that there are still applicants coming with less than acceptable ratings. The decline in accounts placed for collection from 53 to 51.2 was a little steeper, but is consistent with the pace set for most of the year and suggests that many companies are still trying to get back into financial shape.

-NACM staff

(Note: For more on the November CMI, check out the weekly NACM eNews release, available late Thursday afternoon, and, for full statistics and analysis, visit www.nacm.org on Friday).

As many of you know, FCIB has worked in partnership with the Department of Commerce on many initiatives designed to promote and advance international trade, including the development of the International Credit and Risk Management (ICRM) online course and the International Trade Finance Guide.

Earlier this month at the FCIB Global Conference held in Philadelphia, Carlos Montoulieu, Acting Deputy Assistant Secretary for Services Industries in the International Trade Administration of the U.S. Department of Commerce (DOC), officially released  the 3rd edition of the Trade Finance Guide and announced that FCIB will continue to promote the Guide, including producing print copies of the Guide through the Department’s partnership program.

In 2007, FCIB assisted the Commerce Department in the development of this concise guide, designed to help SMEs quickly learn how to choose the most effective and efficient credit mechanism when selling cross border. Subsequently, in recognition of its contribution to the Guide’s development and promotion, FCIB was awarded a Certificate of Appreciation from the Under Secretary for International Trade.  Since 2007, more than 300,000 copies have been distributed to small and medium size businesses, helping the Guide become a popular export assistance resource.

FCIB is proud to continue to promote this new Guide and FCIB is honored to support the U.S. Department of Commerce’s International Trade Administration.

We are confident that this initiative will generate many new business leads for FCIB and NACM, allowing both organizations to advance their missions to assist businesses strengthen their commercial credit operations.

-Robin Schauseil, CAE, NACM President
 

Several years in the making, the UCC Filing Service went fully live online this week, joining the Mechanic’s Lien and Bond Services under NACM's Secured Transaction Services umbrella.  The service provides the means to mitigate the risk of debtor nonpayment for businesses that sell or finance various types of personal property under UCC’s Article 9, as well as those that lend the labor, materials and other services under state law. The purpose, at its simplest level, is to help creditors become a secured party as an investor, thus putting them in the best possible position to get paid. Remember: secured creditors get paid out 100% (if money is available) before unsecured creditors get one cent, per bankruptcy law. This is increasingly important in areas such as construction as the domestic economic recovery, already sputtering, is threatened by ongoing and new threats, such as gridlock in the U.S. Congress.

Powelson noted that getting involved with UCC filings is not difficult when using a service providing the know-how. He recalled a colleague in Texas who, after years of “me badgering him to protect himself,” made a UCC filing about six month before a major customer filed a massive, $40 million bankruptcy. The colleague’s business was paid nearly 100% of what it was owed, unlike unsecured creditors who received pennies on the dollar.

“That filing cost him $82 and took about one hour to complete,” Powelson said. “With getting paid what he was owed, he joked that the program already paid for itself ‘for about the next 2,200 years.’ I think there are a ton of credit managers who just aren’t sure about the process and perceive it as very cumbersome. The process can be somewhat easy, actually. But sometimes you’ve got to get crushed or really kicked in the teeth and have your boss say, ‘we can’t do this anymore. What could we have done to protect ourselves?’ before you make the move.”

- Brian Shappell, CBA, NACM staff writer

FCIB's 23rd Annual Global Conference speaker John Ahearn, of Citibank, warned credit managers Tuesday that the problem with European banking debt is not just an economic issue there or even a trade headache for the United States and other exporting powerhouses; it is also a credit liquidity issue going forward on a dangerous worldwide level.

Ahearn reminded Global attendees just how much of a player European banks are in providing liquidity and capital. For example, Spanish banks are keenly important to funding a lot of businesses operating out of South America, including several emerging markets, and Germany is hooked into many parts of Central America as a credit source of massive prominence.  

Moreover, many banks involved in providing such credit may have to make tough decisions of what areas and markets they want to focus on in the coming years. What that means is the potential for less liquidity or less favorable terms. It also means that businesses of various sizes that are overly dependent on one multi-national bank could find themselves scrambling to replace them should they exit that company's market.

"Banks are going to have to start making strategic decisions: What markets do I want to be in? We believe there are going to be retractions, and this is going to be global," Ahearn said. "Banks are going to pick products they're good at and exit the rest." In essence: make sure you are using multiple banks so that if the bank you do most of your business with gets out of that business, you have other options.

-Brian Shappell, CBA, NACM staff writer
 

Panama’s rise in prominence continues to catch the eyes of the business and investment worlds. The latest to take note, and take action, was Moody’s Investment Services.

NACM has noted previously Panama’s commitment to massively expanding its well-known and oft-used canal as well as its continued work to break down inter-governmental trade barriers has helped in positioning the small Latin American nation as increasingly prominent. Moody’s Investment Services listed the same among many reasons it raised the government’s credit rating Monday.

“Panama's economy has grown at an average rate of 7.3% during the past 10 years, the highest rate of growth in Latin America and among the highest in the world. Despite weakening external conditions, Panama continued to show remarkable economic dynamism in the first half of 2012,” Moody’s said. “Though recent growth rates are not sustainable, medium-term growth prospects remain strong thanks to the expansion of the Panama Canal, the Martinelli administration's ambitious infrastructure investment plans and the recent ratification of the free trade agreement by the U.S. Congress.”  Moody’s added that newfound commitment by Panamanian officials toward gold and copper mining also make the nation attractive from a credit and investment point of view.

This comes less than two months on the heels of the Commerce Department noting that, among major export markets, no nation has seen a larger rise in the purchase of U.S. goods in recent years. To wit, the 36.3% increase since 2009 (through September) bested the second faster riser (Turkey) by nearly 8 percentage points.  

Key to watch in the coming months and years will be something else that has been already been on expert market-watchers’ radar: whether the government there can manage growth responsibly and avoid creating troubling fiscal imbalances for the medium- and long-term. It’s something that not-too-distant neighbor Brazil, despite its hot status of recent years, has once again seemed to fail in mastering.

-Brian Shappell, CBA, NACM staff writer
 

The October Credit Managers’ Index, available now at www.nacm.org, reflected the mood of the overall economy, one with some aspects point in a positive direction and others decidely the opposite.

The sense is that a few of the big issues that have been affecting other economic measures are having an impact on the CMI. While it is hard to point explicitly at the “fiscal cliff” as a cause for overall decline, it is quite apparent that the uncertainty affecting business decision-making is having an impact, as some of the future indicators are weaker than expected at this point.

The most distressing category in this month’s survey, and the one that seems to point to the fiscal cliff issue, would be sales. CMI statistics on sales show a decline to the lowest level since the middle of 2011. While disappointing and troublesome, sales remains in expansion terriorty, if nothing else.

"The silver lining in this case would be that a solution to the crisis would likely result in a jump in capital expenditures and investment in general, said Chris Kuehl, PhD, economist for the National Association of Credit Management (NACM) regarding the fiscal cliff issue. "The downside is that the powers that be could still allow the unthinkable to occur."

Meanwhile, favorable and unvavorable factors stayed on the encouraging side of the growth/contraction line. However, one particular category of importance showed a significant decrease. Dollar amount beyond terms sported the biggest decline among unfavorable factors. In the past, this has indicated that companies are starting to struggle to meet their obligations, and in the months to come some of the other negatives start to accelerate.

The complete CMI report for October 2012 contains the full commentary, complete with tables and graphs. CMI archives may also be viewed on NACM’s website.

-NACM Staff

Small business lending is expected to increase according to the most recent survey of bank risk professionals published by the Fair Isaac Corporation (FICO).

Bankers expressed widespread optimism about the small business lending sector, voting by more than a two-to-one margin that the approval rate for small business loans and the total amount of credit extended to small businesses would increase rather than decrease. More than half of all respondents predicted that the overall supply of small business credit would meet demand, although this could simply be a symptom of weak demand rather than a boost in available credit.

Notably, survey respondents were less positive about small businesses' requests for credit. In the first-quarter survey, a large majority of 61.9% of respondents predicted an increase in the amount of credit requested by small business. This figure increased to 69.1% in the second-quarter survey, but fell hard to 56.5% in this quarter's survey. This is still a positive trend, with a majority of participants expecting increased requests for credit, increased approval rates and increased credit in general, but it's not as positive as many had hoped.

Still, the third-quarter survey, conducted for FICO by the Professional Risk Managers' International Association (PRMIA), didn't leave the banking industry wanting for reasons to be anxious. Concerns in the student loan market were rampant in the survey, with a 61% majority of respondents expecting delinquencies on student loans to increase over the next six months. This marks the fourth consecutive quarter that respondents have predicted a worsening of student loan delinquencies.

Commercial credit risk managers might not have to worry about the threat of student loan defaults, unless they're their own, but the adverse effects on the economy at large from these delinquencies could be potent.

- Jacob Barron, CICP, NACM staff writer
 

The latest numbers from the Purchasing Managers’ Index (PMI) are causing some mixed reactions.

On the one hand the data was far more inspiring than was anticipated: The manufacturing index was above 50, and the service index came back with some numbers that stunned the analysts. The expectation was that there would be a small gain—something that would essentially match those seen in the manufacturing data. Instead, the service data for new orders increased from 53.7 to 57.7, a major gain by most any measure. But almost immediately after the statistics' release there were experts trying to add some perspective and calm down some of the reactions.

There are a couple of caveats when it comes to the improved service sector data. The first is that the jump seems to be the result of a great many reports of flat new orders as opposed to any significant increase in the orders themselves. The questions that are posed to the purchasing managers are simple—has there been more or less or have things stayed the same. This month the responses were overwhelmingly in the “stay the same” category. This made the index look pretty good and, in the great scheme of things, it is far better to see steady performance than it is to see weaker numbers. That said, the rise in the service sector new orders index does not signal a major increase in activity—just an absence of decline.

The other caveat is related to timing. This is the point in the year where there ought to be more activity given that the retail community is gearing up for the holidays. However, there may be more weakness in retail than originally expected, and that should be showing up in the PMI numbers as it has already manifested in the Credit Managers’ Index.

-Chris Kuehl, PhD., NACM economist

The Credit Managers’ Index (CMI) number for September is nearly the same as in August, falling by the narrowest of margins.

The gain made in the CMI in August showed an economy with an overall better performance than earlier in the year, and was the highest since for February. The sense was that some key areas were showing improvement, as the CMI has only been at or above this level three times this year. It can be asserted from September’s CMI (now available at www.nacm.org) that the momentum from late summer is carrying forward to some extent into the fall.

This occurred even with a slight decline in the favorable factor index due mostly to a reversal of the sales number, which newly unveiled statistics indicate is one of the worst two results of 2012.  It may be the most worrisome of the figures going forward because, without some expansion in sales, the other categories may start to slump as well. Still, there was plenty of positive news in categories including new credit applications, amount of credit extended and dollars beyond terms.

-NACM Staff

(Note: The complete CMI report for September 2012, available now, contains full commentary, tables and graphs. CMI archives may also be viewed on NACM’s website).

The latest Credit Managers' Index (CMI) – set to be unveiled Thursday afternoon at www.nacm.org – is one that carries much for which to be pleased. At the top of that list, is overall the CMI reading itself.

Statistics released later today will show the CMI reversing the downward trend of the last four months and potentially challenging the year’s best month results. Within the numbers, categories expected to have performed particularly well include the index of unfavorable factors. Therein, the biggest expected improvements are likely to be in accounts placed for collection, disputes and filings for bankruptcies

“It is far too early to declare that there has been a dramatic turnaround in the economy,” said NACM Economist Chris Kuehl, PhD. “The best that can be said about the current CMI number is that a declining pattern was thoroughly broken, and there is some reason to believe that this could be start of a much more positive trend than has been seen through most of the summer.”

-NACM Staff

(Note: The complete CMI report for August 2012 contains the full commentary, complete with tables and graphs and is available on the NACM web site. Credit and finance professionals who want to take the next survey will find it open September 17-21! Simply go to http://web.nacm.org/cmi/cmi.asp at any point during these dates. You also can sign up here to be reminded to take the survey on a monthly basis).

Angela Bradbury, ICCE, group credit manager at UK-based Innospec, Inc., and moderator of the first of five upcoming FCIB roundtable events focused on “The Credit Department as a Profit Centre” noted that there are two kinds of credit managers out there right now: “There are those with flair who are getting involved in the business [and big decisions] and the others who are operating in a very restrictive space.

Getting more involved in the company, getting your voice heard and advancing the role of today's credit professional are becoming not just wish-list type items for today's credit manager but, rather necessities.

"It’s not about going in the CFO’s office shouting and screaming, it’s about showing you’re an indispensible service," Bradbury said. "It’s not about making life difficult or easier, it’s about being a bigger part of the business’ bottom line.” Bradbury, like 2012 NACM Mentor of the Year Larry O’Brien, CCE, ICCE and a growing group of others, added that too many credit managers don’t push the agenda and confirm that his/her outlook and goals are still in line with those of upper management, the finance people or even sales.

The FCIB roundtable events, to begin on Sept. 13 at the Clerkenwell London with Bradbury, are designed to get credit people talking about how to sell the credit department’s value to others in a company, the “P.R.” it takes for this to work and how to assess the credit and risk assessment expectations that exist at your company (and how to react to them), among other topics. Subsequent events this fall in the FCIB series will be held in Amsterdam, Brussels, Zurich and Dusseldorf.

-Brian Shappell, CBA, NACM staff writer

For more information or to register for the first roundtable event in London, visit http://www.fcibglobal.com/events/event-calendar/details/125-the-credit-department-as-a-profit-centre-your-value-in-the-supply-chain-uk-london.html.


 

A poll of small business owners finds that the perception on the street is that it is unlikely they’ll be approved for the credit they ask for – whether via a partial amount granted or full-on denial – so many have simply stopped applying. But there does seem to be some optimism out there for the next year, whether based on tangible signs or blind hope. Meanwhile, interviews from the poll seem to tangentially promote an idea near and dear to NACM: workers need to advance and expand the roles of their positions to boost their stability.

The Federal Reserve Bank of New York unveiled its Small Business Borrowers Poll, which included results that indicated microloans are at a peak demand right now yet remain highly difficult to garner, especially among start-ups. This often is the case even for new businesses run by a proprietor with a sterling credit history. Poll results based on N.Y. Fed polling also found that nearly 50% of those small business that did not apply for credit/bank loans, opted not to do so out of belief and/or fear of rejection. Perhaps that is with good reason as only 13% of those who did apply in recent months and participated in the poll received the full amount requested. Just more than one-third received a portion of the requested amount, according to the N.Y. Fed.

Additionally, interviews included in the Fed’s report shined a light on the widely held believe that small business owners do not see smooth sailing for most of the remainder of 2012, even if they are upbeat about things being better at this time next year. But, in the meantime, business owners are preparing as if credit isn’t going to come their way, and want employees, from sales to credit, to realize the importance of stepping out of the traditional box of their job descriptions to provide more value and, thus, boost the prospects for the business and their job security alike.

“Whatever you think cash-flow-wise you will need for your worst, worst scenario, like the one you think is never going to happen, double it,” said Allison O’Neill, a New York clothing store proprietor interviewed by the Fed. “Everyone who works here wears many hats…Everyone who's here is a sales associate and a social media manager, and a marketing manager, and an inventory specialist…”

-Brian Shappell, CBA, NACM staff writer

(Note: To view the full report, visit http://www.newyorkfed.org/smallbusiness/2012/).
 

The Credit Managers’ Index (CMI) for July – available now at www.nacm.org and Thursday in eNews – will reflect the grim reality of the economy of summer 2012. It became obvious some months ago that another spring swoon was underway and, like the last few years, the summer was an extension of the deterioration, according to various CMI statistics.  

“The problems that beset the economy earlier in the year have not abated and, now, there are some new ones to worry about [the farm sector, the Euro crisis],” said NACM Economist Chris Kuehl, who prepares the CMI each month.  “There are some signs of nascent recovery, but thus far these have not been enough to reverse the course of the last few months.”

And it’s the unfavorable factors that are telling more of a downbeat story, which has Kuehl more worried than the slide in the favorable indicators.

“The index of unfavorable indicators has now dipped below the magic 50 line that separates expansion from contraction; This is the first time the unfavorable index has been in contraction since the end of 2010, Kuehl said. “This is a precipitous fall, and it is unlikely that a reversal will be swift…the slump is setting in more aggressively.”

Among the biggest areas of concern is the dollar amount beyond terms decline. To wit, problems in that area could be foreshadowing that customers are experiencing newfound cash-flow issues most thought were over at the official end of the recession. Meanwhile, generally weak consumer confidence and a lack of importing interest from struggling European-based trade partners are compounding the negatives.

-Brian Shappell, CBA, NACM staff writer

(Note: for full CMI statistics for July and additional analysis, please visit to www.nacm.org).

Germany long was held up as the model for business efficiency in Europe. Even as problems among southern European Union members first began to bubble over, the business community looked to the Germans as the likely salve to the problem, not just in bailout money but in production, efficient management and consumption by its natives. But, on top of stumbles by others in the retail sector there of late, this week came the headline-grabbing insolvency filing of mail-order retailer Neckermann.

Neckermann reportedly was working on garnering concessions from creditors, but they fell through. Some 2,000 jobs could be lost as part of the retailer’s collapse, and it led many to jump to the conclusion that the EU debt crisis is the primary culprit for the ills of this company and others who have found it tough to stay afloat.

Ben Deboeck, country and sector risk coordinator for Belgian-based Ducroire Delcredere, told us this week that it’s worth noting Neckermann was in trouble for a long while, and that it was potentially unfair to pin its failings entirely on the larger debt crisis. That said, such instances of insolvency could be part of an increasing trend pending on how the EU responds to troubles with members such as Greece, Spain and Italy.

“Given the current sluggish economic environment, it should of course be of little surprise that weaker companies, even in stronger countries such as Germany and the like, are heavily exposed to the current downturn,” said Deboeck, who keynoted FCIB’s Annual International Credit and Risk Management Summit in Hamburg. “I guess the Peugeot/Citroën problems are probably a better example of the direct fallout of the crisis, though, and may be more worrying in regards to things to come for European industries if the downturn becomes really protracted.”

-Brian Shappell, CBA, NACM Staff Writer