Credit Man Index300

The October Credit Managers’ Index (CMI) from the National Association of Credit Management returned to a respectable status, jumping more than two points from 54.9 to 57.0. The readings are back to highs last seen at the start of the year.

The index of favorable factors now sits at 62.6. It is still off the pace set in July and August but is trending in the right direction. The fall of the index of unfavorable factors to 50.9 last month was disconcerting because it was the lowest point reached in almost two years, but its impressive gain this month to 53.2 reaches back to March readings.

“The rebound in the data this month could be referred to as stunning were it not that last month felt like an anomaly,” said NACM Economist Chris” Kuehl, PhD. “Given the progress made through the course of the year, many were shocked at the low numbers registered in September.” Most analysts attributed the slow progress to events outside the US, which remains a concern in the overall business community.  “This global slowdown is still a factor and will likely put something of a damper on the US economy through the rest of the year and into next, but the domestic economy is showing some resilience and that is reflected in the numbers for October’s CMI,” Kuehl said.

Within the favorable factors, positive movement bodes well for the rest of the year. Sales jumped from 60.9 to 65.7, indicating that many sectors of the economy started to come back to life last month. Industrial production has improved as did capacity utilization and factory orders. New credit applications’ growth was more modest, from 59.0 to 59.4, but trending in a positive direction. Dollar collections improved significantly from 59.9 to 61.5, but amount of credit extended declined from 64.0 to 63.8. “The performance here, coupled with new credit applications, suggests that the crash in performance last month made many companies a little more cautious with credit this month,” Kuehl said. “The good data this month may well reverse that trend in the months to come.”

Unfavorable factors were the big concern last month. “The sense was that many companies had invested in expansion at the start of the year and the sluggish economy had made it hard to make that investment pay off,” Kuehl said. “Now there is some evidence that progress is being made in the economy and these companies are expanding as they had expected to earlier.” Rejections of credit applications improved from 52.5 to 53.6, which matches up well with the credit access data from the favorable factors. Accounts placed for collection improved from 50.7 to 52.7, showing some of the stress has eased and creditors are catching up. Filings for bankruptcies sits at 58.1, nearly the same as it was in July and a vast improvement over last month’s 55.8. All three factors previously in contraction territory rose above 50. Disputes climbed from 49.2 to 50.4, dollar amount beyond terms moved from 47.2 to 53.6 and dollar amount of customer deductions recovered by improving from 49.8 to 50.8.

“The sense overall is that much of the crisis atmosphere has dissipated and most creditors are staying current as far as their obligations are concerned,” Kuehl said. “The rapid rebound this month is support for the notion that last month was an anomaly.”

Courtesy:  NACM – National Association of Credit Management

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