Expectations for the rest of the year change with a drop in the the National Association of Credit Management's economic report for November. October's improvement now seen as an anomaly, which leaves growing concerns for continued growth.

The data this month sent the Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) back to the doldrums recorded in September. The reading dropped from 57.0 to 55.8, taking the index back to levels not seen since February and March when the economy was in the middle of a significant Q1 recession. It is not as low as September’s reading of 54.9, but still lower than all but three of the last 12 months. The index of favorable factors dropped from 62.6 to 61.2. Remaining above 60 is still good news, but this month’s level is tempered by prior readings as high as 63.8. There was also a drop in the unfavorable factor index as they went from 53.2 to 52.2. That puts this index at the same levels seen over most of the last 12 months and the conclusion reached from this performance is that the higher readings in October may have been the ones that were out of line with past behavior.

“This is the least desired outcome,” said NACM Economist Chris Kuehl, PhD. “The main question at the end of last month was whether the readings in September were anomalous or were October’s out of sync? It now appears that the October numbers were the odd ones, and that changes the expectations for the rest of the year. There would not be quite the concern were it not for the fact that other economic data tends to support the notion that growth is stalling and worries that seemed to have faded earlier in the quarter have started to resurface.”

Breaking down favorable factor index data provides some insight. Sales has been the most variable factor, and the 62.7 this month puts it right smack in the middle of recent performance. New credit applications dropped from 59.4 to 58.1, a low that goes back to March. The decline in dollar collections was also significant, dropping from 61.5 to 60.3 and returning to the levels seen during the summer. The only factor that didn’t change that much was amount of credit extended, from 63.8 to 63.7. “This is interesting given the drop in new credit applications, as it suggests that fewer companies were getting credit but those that were receiving credit were getting more than in the past,” Kuehl said. Larger companies appear to be expanding and that coincides with the data coming from the capital expenditure numbers.

“The breakdown in the unfavorable factors shows some serious problems developing and these are cause for concern,” Kuehl said. Disputes was the only factor to improve with its rise from 50.4 to 50.8. Rejections of credit applications fell dramatically from the reading in October, from 53.6 to 51.7, the lowest number over two years and beating the low point of 51.9 set in August. “A sudden tightening of credit is not a good sign,” Kuehl said. Accounts placed for collection dropped from 52.7 to 51.8, which is also worrisome even though the readings have been bouncing around most of the year with lows earlier in the year and some higher readings lately. Dollar amount beyond terms slipped from 53.6 to 52.3 and dollar amount of customer deductions also slipped, from 50.8 to 49.7. The deductions number has hovered around neutral territory all year, but the hope was that it would stay above 50 for more than one month. Filings for bankruptcies moved from 58.1 to 56.8 and that is lower than most of the last three years, which creates more concern about the stability of businesses.

For a full breakdown of the manufacturing and service sector data and graphics, view the complete November 2014 report at http://web.nacm.org/CMI/PDF/CMIcurrent.pdf. CMI archives may also be viewed on NACM’s website at http://web.nacm.org/cmi/cmi.asp.

NACM, headquartered in Columbia, Maryland, supports more than 15,000 business credit and financial professionals worldwide with premier industry services, tools and information. NACM and its network of affiliated associations are the leading resource for credit and financial management information, education, products and services designed to improve the management of business credit and accounts receivable. NACM’s collective voice has influenced federal legislative policy results concerning commercial business and trade credit to our nation’s policy makers for more than 100 years, and continues to play an active part in legislative issues pertaining to business credit and corporate bankruptcy. NACM's annual Credit Congress & Exposition conference is the largest gathering of credit professionals in the world.