A survey by Euler Hermes ACI, a credit insurance firm, found that businesses are bracing for an economic slowdown as their customers face more trouble paying bills on time.
And the firm’s chief economist, Daniel North, says it’s probably going to get worse over the next few quarters. “So far, the credit managers have been able to contain the triple threat of higher oil prices, the burst housing market bubble, and the lingering effects of tightened monetary policy conditions,” he said in releasing the survey results today. “But the responses from those surveyed suggest that the deterioration in the rest of the economy may be starting to catch up with the credit managers.”
Euler Hermes released these survey responses about how the economy performed in October, indicating that the damage had spread beyond housing to other manufacturing and service sectors.
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Electrical equipment: “We’re anticipating a slow down in sales for 2008.”
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Trucking: “Delinquencies increasing and potential bad debt on the rise.”
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Plastics: “We have had several companies close due to their bank not renewing a loan.”
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Food: “It is taking at least 25% more time to collect the same money.”
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Transportation: “Business is getting tougher, collections are much tougher and it looks like it will be this way for some time to come.”
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Home furnishings: “Sales are slow.”
Mr. North puts the probability of entering a recession at more than 50%. “I don’t think things are so out of balance that we are looking at something really disastrous,” he said. “I do think we’re going to see very slow growth — if not an outright recession — next year. I don’t think it will be deep or long, typically two quarters of some negative growth, but the global economy certainly seems well balanced enough that we’ll be able to come out of this alright. Plus you’ve got the Fed cutting interest rates going forward, and that will certainly have a lagged effect that will cause us to enter a recovery next year.”
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