As it did in October, the Credit Managers' Index (CMI) from the National Association of Credit Management (NACM) slipped again this month, from 55.2 to 54.9. The most dramatic movement was in sales, which plummeted to 56.7, a low last seen in December 2009 and almost a full point lower than in October 2012. This reinforces the notion that business is stalled out in anticipation of what might happen with spending and taxation next year. There was some cautious optimism just a month ago, but that optimism has evaporated, as it seems all but certain that there will be no settlement of lasting value on the "fiscal cliff."

Strangely enough, the other favorable factors did not register the same level of distress, although they declined as well. New credit applications actually increased from 56.5 to 57.7, suggesting many companies still expect something will get done in Washington before the first quarter of 2013 is completed. At least they seem to be taking steps to get prepared for a better year. Dollar collections fell from 61.3 to 59.2, which was not a huge drop, but indicates that companies are back to protecting their cash flow and may have started to stretch out their creditors again. There was also a decline in the amount of credit extended, which dropped from 63 to 61.5, taking it back to the numbers seen for most of the year. Overall, the favorable factor index fell from 60.3 to 58.8, a drop that would have been far worse if it were not for the slight improvement in new credit applications.

In contrast, the unfavorable factor index only declined slightly. "Business conditions have not worsened appreciably, it's just that there is not all that much improvement given the concerns that remain in place regarding next year," said Chris Kuehl, PhD, economist for NACM. Rejections of credit applications improved slightly from 51.1 to 51.5, as did disputes from 50.1 to 50.5. Likewise, there was a small improvement in accounts placed for collection from 51.2 to 52.1, suggesting that more companies are staying current on their accounts. "Either that or creditors are feeling more patient," said Kuehl. Dollar amount beyond terms made a bigger jump from 49.9 to 50.9, and dollar amount of customer deductions by a more significant amount, from 49.7 to 51.3. Only filings for bankruptcies declined, from 58.4 to 57.4, but this is a small reduction, and the whole category remains very strong compared to where it was just a few months ago.

The overall sense is that this month's decline is due to the tensions created by the fiscal cliff debate. The inability of Congress and the president to make a deal has already cost significant economic growth, and it is now anticipated that real decline in GDP growth will be the next outcome. "The reaction captured in this month's CMI shows a stark lack of confidence as opposed to anything substantial," said Kuehl. "The overall news for the economy has been pretty good, and so it is with much of the CMI. The factors most connected to mood and confidence are the ones slipping. The whole business community seems to be in state of suspense."

Read the entire December NACM report.