The January Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) appears to have has joined the ranks of the cautiously optimistic. The CMI had been sounding warnings like some kind of credit prophet as it trended down, while other indices were up or at least stable at the end of 2014. This month, however, the reading for the combined index rose to 55.1, up from 54.9 in December.

“This is certainly not a spectacular turnaround as the index was at 55.8 and 57.0 in November and October, respectively,” said NACM Economist Chris Kuehl, Ph.D. “The fact is January’s reading is still the third lowest in the past year, but it is trending in the right direction this month.” Overall, the index of favorable factors held at 60.5, but categories within the index saw some variability. The real change took place in the index of unfavorable categories as it moved from 51.1 to 51.5, Kuehl noted. “Although the numbers remain close, this shift means more to the big picture because the unfavorable numbers have been holding close to the dividing line between contraction and expansion.”

“The breakdown of the favorable factors has been interesting,” he added. The sales category barely budged upward from what it was the previous month and remains low as compared with much of last year. At 61.5, the current reading sits near the average range—a good number given the turmoil of the last several months. Over the past year, it reached a low of 59.1 in March and a high of 65.7 in October. New credit applications fell from 59.2 to 58.3, about what it was in November. “Although no real cause for alarm exists at this stage, a further slowdown in credit applications would suggest more caution in the business community and less expansion activity,” Kuehl said.

Dollar collections may well have the best news of the whole group, climbing from 56.6 to 60.1, which signals that companies are paying their bills more regularly. Amount of credit extended sunk 2.4 points, however, to 62.2. “This is still well within the 60s, but it reveals a pullback in credit activity and raises the question as to why,” he noted. “It seems that there is more caution within the credit community as a whole, and that is affecting the number of applications as well as the amount of credit extended.”

In the unfavorable categories, rejections of credit applications shifted upward from 51.5 to 51.9. “While it appears that there may be fewer applicants, those that are applying are more creditworthy,” Kuehl said. Accounts placed for collection dropped from 51.1 to 50.1, which further indicates that companies are in distress and unable to stay current with their debt. Disputes improved slightly from 48.5 to 49.5, but it is still in the contraction zone. Two other readings climbed out of the zone, however. Dollar amount beyond terms moved from 48.7 to 50.6, and dollar amount of customer deductions went from 48.5 to 50.2. Filings for bankruptcies took a 1.6 downward slide to 56.9. “Although the reading remains in the solid mid-50s, it suggests that the weaker companies that have been in distress are finally giving up,” Kuehl said. “The good news overall for the unfavorable category is that only one reading remains under 50 compared with last month, which had three. While there’s nothing to suggest an imminent boom, it would appear that conditions have started to improve.”

To read the full January report, click here.