The March Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) fell slightly from 54.9 to 54.2, with both favorable and unfavorable factor indexes dipping by roughly equal amounts. Some individual showed significant movement, but there was no clear signal from any of the factors as far as financial stress is concerned, or anything to cause much confidence either.
Sales slipped from its position of 59.2 in February to 57.4 in March. This is a fairly substantial decline of 1.8, but at 57.4, the index is as high as it was in December. “The main concern is that for the last year, the sales reading has been averaging in the low 60s and now there seems to be a struggle to get there again,” said NACM Economist Chris Kuehl, PhD. On the encouraging side, the new credit applications number rose slightly (56.7 to 56.9). “A significant desire to expand seems to exist, and businesses are starting to more aggressively pursue credit,” said Kuehl. “However, serious issues remain in balancing the desire for more credit and creditworthiness.” Dollar collections also improved (57.5 to 57.7), and is continuing to trend in the right direction, but amount of credit extended fell (62.5 to 61.6), suggesting some return to caution on the part of trade creditors. The important point is that this category remains above 60, which is a healthy sign, Kuehl noted.
Overall the index of favorable factors fell from 59 to 58.4. “It would be more encouraging to see that positive trend reestablish, but the drop was not too severe, and 58.4 is the lowest for this index since October of last year,” said Kuehl. “It bears noting, however, that the favorable factor index was mostly at 60 or above in the last year, and those stronger readings were all taking place a year ago at this time.” For the nine months from March-November 2012, the index was over 60 for six, and below for three. Since October 2012, the index was above 60 only once.
There was a similar decline in the index of unfavorable factors, but not as steep (52.2 to 51.4), putting the current reading roughly where it has been for the last year. Volatility and variation in this index exist, but the range has been narrow: a low point of 49.8 in July 2012 to a high point of 53.1 the very next month. The variations within the index were a little more dramatic, and all but one factor fell, with three slipping under 50, the point separating contraction from expansion. Despite the increase in applications for credit, or perhaps because of them, there was deterioration in rejections of credit applications (52.3 to 51.9). Accounts placed for collection reinforced an even bigger downward trend, falling from a respectable 51.8 to 49.7, marking its first time in contraction since July of last year. Disputes showed renewed weakness in its slide (50.4 to 48.3), also marking the first time this factor has fallen under 50 since last July. Dollar amount of customer deductions also fell into contraction territory, but barely (50.7 to 49.9). Finally, filings for bankruptcy posted a significant loss (58.3 to 57.3), but is at least still showing solid growth. In contrast, dollar amount beyond terms provided the bright spot, jumping into expansion territory when it improved from 49.8 to 51.2. “The overall conclusion that can be reached by looking at the unfavorable factor index data is that there are more companies in distress than there were a month or two earlier, and that likely reflects the consternation and confusion that has marked government inactivity the last few months,” said Kuehl.
“The CMI is telling roughly the same story as other economic indicators of late. The latest durable goods order data showed an improvement if growth in the aerospace sector is taken into consideration, but not if the sales that Boeing posted last month are stripped out,” said Kuehl. “Housing data has been strong, but just this month there was a slight dip in the sales of existing homes and in new home building.”
“The statement made by this month’s Credit Managers’ Index was essentially ‘steady as she goes,’” said Kuehl. "Nothing is suggesting a return to recession, but neither is there a sure sign of an imminent breakout in the manufacturing or service sectors.”
The complete CMI report for March 2013 contains more commentary, complete with tables and graphs. CMI archives may also be viewed on NACM’s website.
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