Did A Tap On The Shoulder "Prevent" The US Economy From Sliding Into Recession?

Tyler Durden's picture

The US Ministry of Truth has been hard at work the last month and nowhere is that more evident than in the blatant "tap on the shoulder" that The National Association of Credit Managers must have got this week... to revise their catastrophic indicators back to 'stable'...


Two weeks ago we highlighted what was a stunningly clear indication of the looming recessionary environment (that The Atlanta Fed is now also seemingly suggesting and is consistent with the worst collapse in macro data since 2008). The largest spike in 'credit application rejections' indicated a credit crunch and "serious financial stress manifesting in the data and this does not bode well for the growth of the economy going forward."

According to the CMI, the Rejections of Credit Applications index just crashed the most ever, surpassing even the credit crunch at the peak of the Lehman crisis.


This can be seen on the chart below.




And without any new credit entering the economy, a recession is all but assured.

More details on what may be the most critical and completely underreported indicator for the US economy. The report continues, with such a dire narrative that one wonders how it passed through the US Ministry of Truth's propaganda meter:

By far the most disturbing is the rejection of credit applications as this has fallen from an already weak 48.1 to 42.9. This is credit crunch territory—unseen since the very start of the recession. Suddenly companies are having a very hard time getting credit. The accounts placed for collection reading slipped below 50 with a fall from 50.8 to 49.8 and that suggests that many companies are beyond slow pay and are faltering badly. The disputes category improved very slightly from 48.8 to 49, but is still below 50. This indicates that more companies are in such distress they are not bothering to dispute; they are just trying to survive. The dollar amount beyond terms slipped even deeper into contraction with a reading of 45.5 after a previous reading of 48.4. The dollar amount of customer deductions slipped out of the 50s as it went from 51.8 to 48.7. The only semi-bright spot was that filings for bankruptcies stayed almost the same—going from 55.0 to 55.1. This is the one and only category in the unfavorable list that did not fall into contraction territory and that suggests that there are big, big problems as far as the financial security of these companies are concerned.

Which NACM summed up thus:

The rejections of credit applications is as miserable as it has been since the depths of the recession—going from 45.9 to 42.0.These are very bad readings and it will take a good long while to climb out of this mess.

*  *   *

Soon after we exposed this shocking hole in the US economic growth meme, the sell-side banks exploded into a fit of narrative recomposition and excuse-finding...

Goldman Sachs "narrative"...


Credit standards tightened sharply during the Great Recession and have gradually eased over the past few years. However, a recent sharp deterioration in the NACM Credit Managers’ Index—a series which has typically not generated much market interest—has prompted questions about whether credit standards are tightening anew.


The NACM index captures terms of trade credit extended to businesses by suppliers. As such, it does not reflect directly on credit standards imposed by commercial banks on C&I, CRE, mortgage, or consumer loans. The recent downturn in the index appears to be partly related to more cautious credit extension from suppliers to smaller energy sector firms. Even so, the extent of the recent weakness is surprising.


Despite a reasonable narrative for credit tightness in the energy sector, the fact that the NACM index is a diffusion index should naturally down-weight extreme changes among a limited subset of respondents. As a result, the extent of recent weakness appears surprising. According to our equity analysts, large producers of industrial machinery have generally not indicated significantly tighter terms of trade credit, and auto dealers do not seem to be facing difficulty obtaining floor plan financing (i.e. financing inventories). In addition, C&I loans—the closest analog to the coverage of the NACM index with regard to bank lending—has continued to grow at a healthy rate according to the Fed’s weekly H.8 release, although changes in credit conditions are likely to show up in loan growth only with a lag. Finally, credit-related questions in the NFIB's small business survey revealed a slight tightening in March, but not nearly as much as suggested by the NACM index.


Overall, absent deterioration in the SLOOS data—which is more comprehensive and in our opinion probably more reliable—we would be reluctant to read too much into the recent volatility in the NACM index with regard to broader credit conditions.


UBS "narrative" before...


Credit is the lifeblood of the world economy, and we believe the retrenchment of lenders from extending new credit is a highly reliable leading indicator of future problems for borrowers and the economy at large.


...recent monthly surveys from the National Association of Credit Management’s Credit Managers Index (CMI) paint a picture in stark contrast. Simply put, measures of trade credit (the financing of receivables and inventories) have deteriorated sharply from January to March and are at their worst level since the financial crisis. We believe this data point should not be dismissed, and is an indication of the negative credit ramifications from dollar strength and falling EM demand.


It may indicate that stressed borrowers are reaching for a lifeline and getting rejected. This was seen during the financial crisis when demand for trade financing increased even as banks cut supply.


And UBS "narrative" after...


The severe drop in the NACM credit market index has been revised away. In a recent economic comment titled "Credit Controversy", we had called attention to the National Association of Credit Management Credit Market Index, which plummeted in March. That weakness has now been partly revised away, and April data suggest stabilization. The credit market index has certainly softened, but its decline more closely resembles earlier soft spots during the current expansion. Before this revision, it had more closely resembled the runup to the credit crisis.


And BofAML "narrative" destroying NACM data...


Periodically an obscure economic indicator or survey pops up on the radar screen, suggesting something big is happening in the economy. The latest example is the Credit Manager’s Index.


Before we hit the panic button, consider four facts. First, it only deals with trade credit – credit a firm extends to its customers (typically other firms) to facilitate sales. It is not a measure of bank credit or credit more broadly in the economy. To the extent that a lack of trade credit would ultimately hurt sales, the recent decline may be self-limiting. Second, it appears to be a relatively ad hoc survey, so it is possible that the addition or exclusion of a few key respondents could significantly move the index – although the group that puts it together suggests that is not the case.


Third, it fell largely because of a collapse in just two of the ten components in this index: “amount of credit extended” and “rejection of credit applications” (where a drop in the former means less credit extended while a drop in the latter means a larger number of rejected applications). So there is apparently some sort of minicrunch in trade credit according to this sample. Finally, despite its alleged great prediction record it didn’t drop below 50 in 2008 until after the recession had started. The “rejection of credit applications” component, that is signaling disaster today, didn’t drop below 50 until the middle of the recession.


In sum, like many such indicators this survey probably is useful for members of the narrow industry it covers. However, there is a good reason why macroeconomists like us had never heard of the survey.

*  *  *

And so - after all that - we get April's data from NACM. If ever there was a more clear indication of a firm getting a major tap on the shoulder to 'fix' the data or face 'consequences' this was it. Against a background of detrimental commentary from Goldman Sachs, BofAML, and UBS, NACM revised (massively) the last two months data, in their words, "to be "more consistent with the numbers that had been seen throughout the past year," instantly removing any looming recessionary indicator (along with any credibility they had). NACM explains their "revisions":

The big declines in amount of credit extended in February and March have been revised from 52.1 and 46.1 respectively to 60.5 and 60.6 - more consistent with the numbers that had been seen throughout the past year.


The numbers for rejections of credit applications went from 48.1 in February to 51.4 and March went from 42.9 to 2.6.


The remainder of the categories were unchanged...

NOTE: How exactly does one revise survey respondents answers from the last two months? Ask then again now how they felt in Feb? Did they lie at the time about the credit application rejections? The CMI polls 1,000 trade credit managers across the US and asks respondents to qualitatively assess changes in lending conditions from prior months. The index constructed is a diffusion index, similar to PMI indices (any readings greater than 50 indicate an economy in expansion, any readings less than 50 indicate an economy in contraction).

This leaves us with this chart as the plainest indication yet of the smoke and mirrors bullshit being pulled on every gullible non-skeptical American about the state of their nation:


And, for those who shrug this off as "well, it's just seasonal adjustments" or "well,  it's just Zero Hedge conspiracy stuff again," here is none other than the NACM last month destroying their own future credibility by removing any doubt that the collapse in the data was an aberration...

We now know that the readings of last month were not a fluke or some temporary aberration that could be marked off as something related to the weather.


There is quite obviously some serious financial stress manifesting in the data and this does not bode well for the growth of the economy going forward. These readings are as low as they have been since the recession started and to see everything start to get back on track would take a substantial reversal at this stage.


The data from the CMI is not the only place where this distress is showing up, but thus far, it may be the most profound.

You decide - does this look like a normal 'revision' (that remember only took place in the two sub-indices that showed dramatic weakness and none of the others) - or is this a giant "tap on the shoulder" from someone to 'fix it or you're f##ked!"?

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Fish Gone Bad's picture

Ok, now things look scary.

Looney's picture

... How exactly does one revise survey respondents answers from the last two months?

Silly… you just seasonably adjust to whatever you want it to be.


Dennis Gartman

Oh regional Indian's picture

Bring out the frilly knickers and party like it's 1929.

It's not even a rhyme, it's a frigging repeat.

Loosen lending

Tighten money supply

Tighten lending

Swallow resulting weak banks

Rinse and re frigging peat.

Like clockwork, S&L crisis was just a greedy greedy aberration by the Bushes because they could.




Haus-Targaryen's picture

I am hoping to get another 2-3 months out of the system before collapse.  

Am I being realistic?  

Harbanger's picture

Depends where you live, to some it's already collapsed.

Haus-Targaryen's picture

On an aside -- I had to do a report on a couple asset classes in the States over the past few months.  I submitted it to my boss in the States on Wednesday of last week.  I laid out essentially and irrefutiably why the asset classes are horribly over-valued, most of the barometers used to measure their value are horribly bastardized, and why we should avoid them like the plague.  

My boss sent me an email Thursday in the US around noon EST -- where he said he did not appreciate me injecting my opinions into the report and I should try again without a biased approach.  As an example, he said I should take out the labor force participation rate as it is a biased barometer and should use Federal Unemployment numbers exclusivly.  He said I should quit comparing the CPI to vairous food, energy,education and medical care price indexes, as it presents an unfair picuture of the USD's purchasing power of these assets and should focus on the CPI instead.  He said the Baltic dry index is irrelevant and our clients care more about equity performances, and I should take out the BDI.  

Essentially he wants to lie through my teeth to these people.  I don't know what to do, except know for a fact that, given this guy is one of the top 5 at a firm literally everyone on here knows -- and he is considered to be a genious in his field -- we are all beyond fucked.   

SWCroaker's picture

Haus, my suggestion: get over it, learn to lie.   Just don't ever start believing your own lies.

Surviving in a f'ed up situation sometimes puts the positive aspect of retaining your head above those accrued from a moral fight against the system.   Look in history to the example of Sophie Scholl, who (in my armchair quarterback opinion) gave her life in protest, and thereby removed herself from the scene for what could have been 70 years of highly successful subversion and rebellion.  

Spitting into the wind isn't all that noble in the end.

Haus-Targaryen's picture

This is essentially what I am doing.  

"Yeup, MBS are a great and safe buy.  Seriously.  Its different this time."  

I am documenting this via emails to myself.  Noting what egregious bullshit it is, and how I am being forced to do this and by who.  No one will hang this around my neck when this whole thing burns to the ground again. 

But I guess I gotta keep doing this kinda crap until I can start making some decisions around here -- assuming we survive the next "correction" -- which I am not sure of.   

Skateboarder's picture

Hang in there Haus, and give 'em what they want - you don't need to feel bad. It's all lies in the end anyway. Stay true in your heart, and live for the remaining righteous things in life. In the days of manufactured existence, righteousness is you producing 'unmanufactured' output. Always important to remember that job =/= work. Your work is what defines your contribution and connection to the universe, and it can be entirely within your head.

weburke's picture

this is a hopefully less murderous version of the "plumbers" who "fixed leaks" (killed people) who knew too much about the kennedy president killing. some of those guys were later used in the nixon breakin set up.

Haus-Targaryen's picture

This is one of the reasons I left the US. I kinda of look at the US right now as a Rome ca., 440 a.d./USSR 1987 analogue.  

Still powerful and a bite, but about to get turned into a shithole via their own making.  

Rome never came back, Russia is still miles away from where the USSR was -- I think the US will be lucky if it gets back to where it was ca., 1910 -- but given how fascism works, I am not holding my breath.  

Manthong's picture

Credit? We don’t need no stinking credit.


Supernova Born's picture

The first casualty of truth is your job.

MonetaryApostate's picture

Dry up that money supply folks, so the rich and use it to buy up all those "Fire Sale" prices in bankrupt cities & nations!  Greece & Baltimore anyone?


g'kar's picture

"Did A Tap On The Shoulder "Prevent" The US Economy From Sliding Into Recession?"


I suppose a tap on the shoulder is preferable to a double tap to the head.

MonetaryApostate's picture

I suspect that's on the Agenda..... (Cough Baltimore Cough)

Squid-puppets a-go-go's picture

check it out - thats not a hockey stick so much as the grim reapers scythe

DeadFred's picture

Be sure you keep hard copies of your original report and the boss's email telling you how to change it. They may not help but you're hopelessly screwed without them.

Haus-Targaryen's picture

That is an excellent suggestion.  I'll start printing stuff of en masse. 

Too bad I cannot share this stuff with anyone, but you guys can use your imagination.  Its probably pretty close to accurate.   

FreedomGuy's picture

I am impressed your correctly named our economic system, fascism. Full state control that has some strictly limited free markets.

Lying is the order of the day. Be sure to compliment the emperor on his clothing while failing to buy from the same store.

The whole world goes down with this charade this time.


I just finished reading this:


China is doing this stuff on a ...Chinese scale. They really believed all that keynesian central planning crap. And what is the stuff you see in all those photos? Those are commodities directly or indirectly. Commodities which are misallocated and for which there is no organic demand.

Haus-Targaryen's picture

True.  We are all lying not only to one another but to ourselves in much of what we do.  The problem is reconciling the way you want to be with whom you are.  Its easier for some than for others.  

I try and do excellent work, but its really difficult droning on about stuff I patently know to be false.  The self-confirming bias is strong is many people at the top who survived the 2007/2008 shitshow.  Their faith in central banks is massive, as, they were the ones primarily benefitting from their actions.  People like me -- grunts in the organization who have been getting killed in electricity bills and property prices as these fuckers drive the market stratospheric purchasing whole blocks of apartments @ less than 3% to turn into rent properties and their MILF wifes sit at home voting for these faschist "green" parties demanding stupid electricity and gas taxes to reduce consumption -- all the while driving a Porsche Cayman Turbo S, which gets like 12 MPG downhill in neutral.  

Fuck these people.  Its a good thing my third language I am fluent in is bullshit -- if it wasn't I'd be sleeping under a bridge right now.    

WayBehind's picture

"12 MPG downhill in neutral" ... haha good one!

Marlon Brando's picture

If your firm offers mutual funds  maybe they have a bearish fund, where your input would be appreciated. Maybe you can ask for a transfer to that department.  Just a thought.  

Haus-Targaryen's picture

They do, and I've thought about it. 

I'd really love to start up my own REIT, as I've got some hyper-accurate models of growth areas in Germany (BER and FFM) -- and then for "fun" properties in Germany are horribly marketed.  

The money making opportunities in these markets are truly without end -- it amazes me people keep sticking huge sums of money in equitiues when you could own real property with history.  

Dead Canary's picture

Haus, you should be in full Cover Your Ass mode. Guys like you make excellent scapegoats when the poop hits the propeller.

Haus-Targaryen's picture

Yeup, like I said documenting everything. 

TheReplacement's picture

Last bit of advice:  Find a job you can do without compromising yourself or your values.

Haus-Targaryen's picture

I am not going to change jobs until the reset.  I feel like all of my peers who are starting new jobs right now doing other stuff are setting themselves up for failure. 

FreedomGuy's picture

Haus, your posts are the best reading here.

Could you strike out on your own as a contrarian? I am sure your former employer would try to crush you but my bet is your clients do not want to be caught in the next lemming cliff run.

I believe you are seeing a microcosm of why virtually all companies/corporations fail over time. It is the enforcment of compliance and complicity with no innovation or in your case, truth and reality.


Haus-Targaryen's picture

Part of me would like to strike out on my own, but not right before a major down turn.  There are enough people in my organization who know where I stand.  When SHTF financially, I can imagine they'll be calling me.  It'll be a busy day, as I won't be able to watch the world come apart on ZeroHedge.  :( 

That being said -- I think enough people can see value in opposing view points on monetary issues so long as it is based in logic & reality.  Those that refuse will get fed through the wood-chipper.   

Urban Redneck's picture

If... when... until... as long as... et al.

All are great qualifiers.  You are smart enough that you shouldn't have to lie, even if your boss is a genius.  The fact is that if you can't push product to customers...  you won't have any intellectual or moral conflict to worry about.  So write something that they will like and will continue to buy, and can read whatever the hell they want into because of their own confirmation biases, but still allows you sleep well at night.  Who knows, perhaps one of your customers is genius, or has some basic common sense and reasoning ability and will be (financially) richer for reading it.  Just don't stoop to baffling them with bullshit or going full-Gartman.

Yes, it's sub-optimal, but you can embrace the suck and successfully navigate the obstacles, or find someplace else to be faced with the exact same obstacles, unless you want to do something else.

Haus-Targaryen's picture

TBF - My boss isn't a genius, most people just think he is.  He got put into an early management role in 86/87 and has been "riding the waive" ever since.  His gift is his staying power.  When many of his peers were getting the "honey, either quit working so much or I'm leaving you" back in the mid to late 90s -- this guy went through like 3 marriages.  I am faily confident I could get a homeless person to do his job, if and only if the homless person  never put down the booze.


Urban Redneck's picture

That should make it somewhat easier.  People confuse perspective with reality.  In the markets, the majority perspective largely determines the reality (within and of the market).  Unfortunately, then people confuse the market with reality.  

When we went to raise equity, or when we help clients arrange financing so we can sell them moar materials- we have to prepare financials projecting the next 5 years.  I know two things about my own projections 1) they will be wrong and 2) Emerging market credit cycle timing is different and usually out of sync w/ G7 cycle timing, which is almost always out of sync with my Customers' needs.  Regardless, TODAY is great! day to underwrite that 10M loan, and unless the sky literally falls, a strong plan and execution can be adapted as any "unforeseen" conditions warrant.   

Haus-Targaryen's picture

A wise man once told me perception is reality.  I believe this to be true.  

If the perception of reality every actually becomes reality we are all screwed.  

Groundhog Day's picture

Haus the suspense is killing me...i really would love to know this so called genius you work for, although i know you cant divulge the info.  I am so tired of getting the roll of the eyeys when i tell friends and family of all the propoganda and BS in goverment data

TheReplacement's picture

Learn to speak the truth.  "According to CPI inflation is..."  Just qualify everything so it is not your report doing the lying.  All you do is report the lies.

Start a blog and publish your real report.

Get posted on ZH.

Share the knowledge with people who actually WANT the TRUTH.

Haus-Targaryen's picture

Its what I am doing.  I sent out the endited version of it for review again yesterday.  We'll see how the changes are accepted.  

One thing I won't take out is the section on central bank intervention.  If I cannot illustrate to our clients who and why the single largest market influencer is Janet Yellen and not millions of individuals acting together creating a trend -- then I don't want to be anywhere near it.  

TheReplacement's picture

Documenting via emails to yourself is bound to get you caught.  If you work for a firm worth half a shit they are capturing that for later, if necessary.  Save the emails to a thumb drive instead.

Haus-Targaryen's picture

I've thought about this -- I'll just say its my way or organizing assignments.  

I have Outlook arranged in a way to establish plausible deniability.  

LooseLee's picture

No, but breaking both knees of a worthless piece of shit has its rewards...

DontGive's picture

Is this a joke? If not, my 2cents:

Keep the original report. Record/note anything he says about it.

When the shit hits the shit, pull out your notes and burry that mothercuntfucker. That is if you still have your job. Then take his job.

Haus-Targaryen's picture

Not a joke.  100% serious. 

You and I were sharing a brain waive length on that one.  See my response above.  

GRDguy's picture

Haus-Targaryen:  Yu'all in good company.

"The men the American people admire most extravagantly are the greatest liars; the men [and women]  they detest most violently are those who try to tell them the truth." H.L. Mencken  (1880 – 1956)

corporatewhore's picture

whistleblowers and corporate truth sayers aren't held in high regard in the corporate world.  Save your ammo just to protect yourself.

Automatic Choke's picture

agree with corporate whore..... you'll never get the revenge or recognition, you'll just be labelled as a smartass....your boss's bosses (& higher) are probably of the same ilk.

you can't change the system, especially if the system (i.e. your place of employment) is part of the problem, which it sounds like it is.

either you decide you want to keep your job, keep churning out those friendly reports, wipe the cum off your chin and keep grinning.....and keep a low profile both before and after things cave in,

or..... you quit and find someplace to work where you won't feel misused.  i'm not advocating either...the latter might make you feel better, but might also have decidedly difficult tradeoffs (location, salary, etc).  it depends on a zillion intangibles.  you'll have to dig deep into your soul to determine where your threshold of abuse lies.

Cloud9.5's picture

Happened to me once. The original boss's note kept me out of prison. Hubris will undo him.