A recent survey of U.S. credit managers by trade credit insurer Euler Hermes ACI finds economic contraction in the manufacturing and service sectors for the first time in years. "A potent combination of negative economic factors could lead the Federal Reserve to once again lower interest rates in an attempt to revive the sharply slowing economy," the company said in December. ACI chief economist Daniel C. North said the data showed a decline in manufacturing and services for the third straight month. Reasons included high gas prices, the housing slump, the weakening dollar, the worsening credit crunch and a drop in consumer confidence. Meanwhile, the number of U.S. business bankruptcies continued to rise in 2007, standing at 20,152 for the first three quarters of the year. Euler Hermes predicted that bankruptcies would hit 30,000 for the full year, a 51-percent increase over 2006. "Businesses today are facing serious headwinds from a slowing economy and an increase in the cost of doing business," North said. The three most serious economic issues, he said, are the impact of increased energy, raw material and labor costs; the tightening of monetary policy by the Federal Reserve in 2004-2006; and the "decimated" housing market.
