All good things come in threes. For the past two years of gloom and doom there is suddenly an uptick of three indicators:
- GDP: Third quarter GDP numbers emerged more strongly than had been anticipated – 3.5% growth after four quarters in the negative
- PMI: The Purchasing Managers Index is now at 55.7 and 3.1 points higher than it was last month. The PMI has always been an excellent snapshot of the current economy as purchasing managers react to the conditions they face every day
- CMI: The Credit Managers Index (CMI) put together by the National Association of Credit Managers (NACM) has broken past the 50 barrier for the first time in over a year. The index started to head in that direction in September when the service side of the equation improved to 50.1 but manufacturing had been lagging – finishing at 49.6 in September. Now both of these sectors are in the growth category and the CMI as a whole is pointing towards growth.
NACM’s analysis indicated that there were two streams of good news. Not only has there been some expansion in terms of credit availability, but there continues to be evidence that companies are catching up on their debt. Companies that had been behind in their obligations have been catching up in anticipation of further growth and the need to ask for more credit in the future.
By the same token, the comments from NACM members suggest that there is more money starting to filter into the system – making credit more accessible than it has been in some time.
An examination of the data shows that there has been significant improvement in dollar collections and the amount of credit extended is higher than it has been in well over a year. There have also been far fewer accounts placed for collection and fewer applications rejected. This latter point is important to note as the credit environment has become much more restrictive and one would have expected more rejections in that environment. This means that many of the applicants are more credit worthy than they have been in past months.
Courtesy: Dr. Chris Kuehl Armada Corporate Intelligence
