WASHINGTON (MNI) – The following is the second and final section of
excerpts from the National Association of Credit Management July report
on credit availability, showing the combined index at 54.6, vs 54.2 in
June and May, published Friday:

Service Sector

The service sector did not fare as well as manufacturing and
managed to reverse some of the gains from the prior month. The big drop
was in sales, as expected. The factor dropped from 63.2 to 60.7. The
numbers are still above 60, but it has been receding since February when
it hit 67.5. Given the large number of retailers that engage in the
survey, this number is not shocking. Retail has been down for the past
two months as the consumer has withdrawn again. The lack of progress on
the job front has sent many people back into a cautious mode, and there
is unlikely to be another burst of consumer activity until the attitude
toward employment shifts again. The uncertainty at the government level
has many people nervous as well, as they are hearing that one of the
possible outcomes of the impasse will be a rise in interest rates. That
makes people far less likely to spend and more likely to save in
anticipation of the worst. The other favorable factors did not change
all that much although there was a dip in dollar collections from 60.9
to 57.1. Unfavorable factors dropped as well, but not drastically. The
biggest problem seemed to be dollars beyond terms, which is consistent
with the bad news coming out of retail. The summer selling season has
been mediocre at best and all signs are pointing to a lackluster
back]to]school sales season. The other piece of bad news is that there
was a spike in the number of bankruptcies and that is rarely a good
sign. The majority of these failures seem to be in the retail sector and
in those industries that service the retail community, transportation
included. There is a small silver lining behind the number of
bankruptcies. The more that the system clears of uncompetitive stores
and entities, the more market share is available for the survivors, but
even those that have managed to make it through to this point really
need to see demand come back to life sooner than later.

The overall service sector numbers are not catastrophic, but they
are not inspiring by any stretch. The lack of consumer demand has been
responsible for the drag on the sector and has made the majority of
companies in this sector more vulnerable to the commodity price hikes
that have been reminding people that inflation is not out of the
question, even this year.

—

July 2011 vs. July 2010

The year]over]year numbers are still swapping places month to
month. The last survey showed a big gain in the service sector, and now
that gain has been lost and manufacturers are seeing some of that
growth. The good news remains that the numbers are still in the
mid]50s, but the bad news is that they have been stuck in the same
position for over a year. By now one would have hoped to see a steady
uphill trend and that has not manifested.

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** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$,M$U$$$]