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Tuesday, June 1, 2010 “Greek Disease” and service sector dip impact credit index The mounting economic crisis in Greece that is being termed the “Greek disease,” and a dip in service sector sales, has helped cause a drop in May’s Credit Managers’ Index (CMI), according to the National Association of Credit Management (NACM). “Over the last few years the CMI has tended to be a harbinger of things to come as far as the overall economy is concerned as it presages the activity in the credit and financial communities,” said Chris Kuehl, Ph.D., NACM economic advisor, who prepares the CMI report each month. According to the NACM’s report, the CMI dipped in 2008, three months before the rest of the economy started to react to the banking crisis that impacted the U.S. and the rest of the world. The May report indicates the CMI is dipping precipitously again. “The sense among observers has been that the Greek crisis and its implications would soon have the same kind of impact on the credit environment that the sub-prime crisis had in 2008. Last month’s data seems to bear this out,” said Kuehl. In the report, Kuehl pointed to growing signs of recent distress in credit circles, including the rise of the London Interbank Offered Rate (LIBOR) to a level not seen since July 2009. The LIBOR is the benchmark for banks making short-term loans to one another and, according to the NACM report, often determines the rates that drive the rest of the economy, more so than the interest rates set by central banks. “A growing concern among bondholders, about the viability of the European economy, has caused some wild swings in both bonds and equities,” said Kuehl. “The data from the CMI is both reflecting this and anticipating some more trouble in the future.” The CMI reported service sector sales slipped from 65.7 to 64.5 in May, which is not a big drop, although it came after five months of steady increases. The level of dollar collections fell from 62.1 to 59.as some business sectors struggled to keep pace with the recovery, according to the report. There was also a reduction in the level of credit as the financial system tightened again, the report said. “There is not the level of panic that existed in the months leading up to the credit meltdown, but there is far more concern about what is happening in the global markets than existed even a few weeks ago,” said Kuehl. “The fact that the major concern is rooted in Europe is slightly better news than if it were motivated by another meltdown in the U.S., but it is entirely possible that the Greek disease will spread.” More Newswire stories CAT invests $820 mil in rail Canada’s top port and railroad announce supply chain agreement NAFTA surface transport trade up 37 percent in March Recession blues: Where will funds for Bayonne Bridge fix come from? Today's Cargo News Archives	Click to browse past stories on these topics: Logistics Ports & Infrastructure Economic Outlook Environmental Impact Technology
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“Greek Disease” and service sector dip impact credit index