Credit professionals saw some improvements in the service sector but drops in the manufacturing sector in the April 2019 economic report from National Association of Credit Management.
The combined score for the NACM Credit Managers’ Index (CMI) saw a slight uptick during the month of April, going from 53.6 to 54. The manufacturing sector saw a slump in the data, while the service sector rose nearly two points, contrary to last month when the service sector fell just over two points.
The CMI has been difficult to predict the last few months as a pattern in the data has not emerged. The highest point still sits at 56.6 from May 2018, and the score has remained at or above 56 for a total of three times in the past 12 months.
“April’s service sector is demonstrating all the growth, while the manufacturing sector slumped,” said NACM Economist Chris Kuehl, Ph.D. “This matches pretty well with other data that has been coming in from the data analysts.”
The combined sales data has remained above 50—well into expansion territory—and hovered in the 60s for a few months. Sales recovered from a reading of 58.2 in March to a score of 61 in April. Each of the favorable factors comfortably remain in expansion territory with only new credit applications and dollar collections seeing readings below 60. The lowest reading sits with dollar collections at 59.1.
The unfavorables have not seen positive readings lately, and in April, the combined total for unfavorables barely reached expansion at a reading of exactly 50—up one-tenth of a point. Kuehl said the unfavorables were even more unpredictable than the favorables. Only filings for bankruptcies and rejections of credit applications remained in expansion in April. Dollar amount beyond terms saw the biggest slump, dropping to just over 47 from 50 in March.
“By and large, the readings improved this month, but the real news has been the changing position of manufacturing and service sectors,” Kuehl said. “At this stage, it is not clear what is causing the shifts in these sectors, and it is certainly too early to identify any kind of a trend.”
While the CMI in March was strong, April saw the combined manufacturing sector dip just under one point down to 53.7. Kuehl said most of the readings in manufacturing have been within the range of 55 to 57 throughout the last few months. The combined scores for the favorables in manufacturing fell below 60 for the first time since January, reading at 58.9. The unfavorables dipped as well but remained in expansion at 50.2.
“There is not a lot of consensus about what has been pushing manufacturing up and down of late, but the dominant view is that uncertainty in the trade sector has played a big role,” Kuehl said. “There have been on again, off again tariff threats, while manufacturers have been struggling to keep track of the changes that have swept through various trade talks.”
April’s service sector bounced back after worrying economists and creditors in March. The combined score reached 54.4, up about two points since March. Kuehl said much of the growth in service came from retail, noting the sales sector in the favorables climbed from 58 to 63.4. Favorables reached a combined score of just over 61, up from March’s reading of just under 58. Unfavorables saw a climb as well and are up by about a point, but they still sit in contraction at 49.8.
“The good news is that unemployment numbers are still encouraging and there have been some recent pay hikes. The tax cut enthusiasm of last year has faded, but so has fear of rapid inflation and a subsequent slide into recession,” Kuehl said. “On the negative side, there are signs that housing and automotive are stalling as far as economic drivers, while the trade war has started to affect the consumer.”
For a complete breakdown of the manufacturing and service sector data and graphics, view the April 2019 report.