Market-watchers looking for holiday cheer will be hard pressed to find any in the December Credit Managers’ Index (CMI), which was released on December 30th 2013 by the National Association of Credit Management (NACM).

The Combined Index fell dramatically, erasing most of the gains made in the last few months and taking the CMI back to levels not seen since the middle of summer. The manufacturing index fell significantly, and that was the better performing sector for the month, as a slow response to Christmas and a slowdown in the housing sector became apparent.

The CMI’s four favorable factors registered the biggest declines, as the gains made in the second half of the year seemed to evaporate. Particularly noticeable for market-watchers will likely be the sharp reduction in sales and new credit applications. The unfavorable factor index fell as well with dollar amount beyond terms taking a big dive in December.

What’s most alarming about the December CMI has more to do with the CMI in general than it has to do with any one particular factor. “The most concerning part of this month’s data is that the CMI is very often a predictor of what is to come in the near future given its ability to track the availability of credit,” said Chris Kuehl, PhD, NACM economist. “This month’s reading could signal that the economy is due to slow down substantially in the first quarter of the year.”

There were some reasons for optimisms, as noted by Kuehl. Mainly, that included only a small drop in amount of credit extended, which “gives some faint hope that many companies are still interested in making credit available to customers they trust,” and an improvement in rejections of credit applications. Additional, the sense that financial issues are of more recent origins could mean a turn in either a negative or positive direction in early 2014.

“The situation could get more serious and some of the longer-term issues could emerge, or this might be more of a curve in the road and just a delay in the response of the overall credit world and the economy,” said Kuehl.

For a full breakdown of the combined, manufacturing and service sectors, in addition to tables and graphs, view the complete CMI report for December 2013 online. CMI archives may also be viewed on NACM’s website.

Source:  Courtesy Brian Shappell NACM