News: NACM News

Credit Managers’ Index on the Rise

Thursday, September 27, 2018  
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The September Credit Managers’ Index continued its upward movement for the second consecutive month, with the combined score hitting its highest point since May. Data from the National Association of Credit Management (NACM) shows the overall index moving from 55.8 in August to 56.4.

 

“The latest data from the Purchasing Managers’ Index (PMI) was welcoming news last month as the readings jumped into the 60s,” said NACM Economist Chris Kuehl, Ph.D. “There has been growth in term of industrial production and the overall GDP as well. This is all somewhat unexpected given the turmoil and controversy over tariffs and trade wars, but timing is everything.” 

 

The index of favorable factors also hit its highest point since May. Last month’s reading of 64.3 jumped to 65.2 in September. Unfavorable factors also increased from 50.1 to 50.6 but continued to show concerning signs.

 

Looking into the favorable factor subcategories, salesincreased from 65 to 68.8. New credit applications declined slightly from 62.5 to 61.9. The dollar collections category edged up slightly from 62.6 to 62.8. Amount of credit extended held relatively stable, moving from 66.9 to 67.1.

 

“This reading [amount of credit extended] has been very high for the bulk of the year and suggests that the biggest and most important creditors are asking for more credit as they are likely to be the companies that have been growing most aggressively,” Kuehl said. 

 

Three of six unfavorable subcategory numbers remain in the sub-50 contraction zone. Rejections of credit applicationsdeclined from 52.2 to 51.8. Accounts placed for collectionincreased slightly to 49 from 50.2. The disputescategory remained in contraction but increased from 46.4 to 47.6. Dollar amount beyond termsincreased from 48.5 to 49.9. The dollar amount of customer deductionscategory held nearly steady, slipping slightly from 48.7 to 48.6. The filings for bankruptciesalso slipped slightly from 55.9 to 55.6.  

 

“There have been more companies with questionable financial futures seeking credit, and many are not deemed a good risk right now,” Kuehl said. “There is already evidence that companies with a lot of foreign trade exposure are not having an easy time of it as far as credit is concerned.” 

 

Overall, this month’s numbers are encouraging. “The movement is subtle to be sure,” Kuehl noted. “But at least it is heading in the right direction, and for two months in a row. Dare we hope for a longer trend?” 

 

View the complete report and analysis from NACM.

 

NACM North Central members are encouraged to participate in the monthly CMI survey. Taking just five minutes to respond helps ensure the index remains a valuable tool for the association and your profession. Learn more.