Credit Managers Index shows small growth in February

The Credit Managers Index grew slightly in February due to growth in manufacturing and increasing optimism, which counteracted declines in other areas.

The index increased to 55.2 from 55.1 in January, which the National Association of Credit Management said is a result of an overall improvement in optimism about the state of the economy.

The shift in sentiment, according to an NACM news release, started at the end of 2009 as businesses started paying down debt in anticipation of needing access to credit in the near future. Expansion usually begins within a month or two of debt-paying activity, the release said.

"The development in manufacturing was matched to a lesser extent by similar movement in the service sector, and other economic indicators added to the notion that something was stirring in the economy,” said Chris Kuehl, NACM economist, in the release. "The first phase in an economic recovery is the replenishment of reduced inventory and there can’t be growth without the supply to meet expected demand.”

The economy, however, will not recover until consumer confidence builds, according to the release. Sales were flat in February after a significant jump in January, and bankruptcies continue to increase as companies and individuals with high debt levels maneuver for more time.

Manufacturing was bolstered by growth in inventories and an increase in sales and credit applications.

"Unfortunately, dollar collections were down, likely reflecting the fact that many manufacturers are now stretching to get in position for the expected recovery and that has affected their ability to pay,” Kuehl said in the release.