Credit Managers’ Index Makes Back Most of October’s Loss, Jumps to 55.2

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The National Association of Credit Management's (NACM) economic report for November 2012 regained the loss experienced in October, showing a return to form in key factors.

Columbia, Maryland: November 30, 2012—The Credit Managers' Index (CMI) reading of 55.2 for November is still shy of the high points reached back in February and March (55.8 and 56.2, respectively), but is back to the levels seen in August and September. When the reading from October fell to 54.4, there was a sense that it may have been an anomaly, and not as dangerous as it would appear. Now that assessment looks more accurate.

The most important jump was in sales, which climbed from 57.4 to 60.4. It is always encouraging to see the data cresting past 60, and this marks the best sales month since August when the reading was at 62. However, the best improvement in the favorable factors was in dollar collections, as it improved from 54.6 to 61.3. "That is an impressive showing by any measure, and suggests that companies are seeing enough improvement in revenues to start catching up on their debt," said Chris Kuehl, PhD, economist for the National Association of Credit Management (NACM), who added that the full-point improvement in amount of credit extended signals more demand from reliable customers than in the past few months. This is a noted pattern, he said. "As companies begin to get current on their credit, they are often motivated by the need to ask for more credit for expansion. First they catch up and then they ask for more credit and that appears to be happening again." The only favorable factor that weakened was new credit applications, which fell from 56.6 to 56.5.

 

There was slightly more volatility in the unfavorable categories, causing a decline in the overall unfavorable index. Every indicator except dollar amount beyond terms, which rose from 48 to 49.9, slipped. Kuehl noted that the fall in rejected credit applications was not major, but a signal that there are still applicants coming with less than acceptable ratings, and that the collection level is consistent with the pace set for most of the year, suggesting that many companies are still trying to get back into financial shape. Of the other unfavorable factors, dollar amount of customer deductions slipped just under the 50 mark to 49.7, suggesting some negotiation is taking place between good customers and their creditors.

"The news is essentially positive despite the evident weakness in the unfavorable factors," said Kuehl. The trend in favorable factors has reversed for the moment and seems to reflect some of the other good news for the overall economy with the housing sector improvement in both the manufacturing and service sub-sectors, along with the evident reaction to a more upbeat consumer. December's data will be watched with more than a keen interest, as this may be the month that most reflects the impact of Hurricane Sandy. "Any impact due to a downturn attributed to storm damage is likely to be serious, but somewhat short lived. By the early part of next year there may be better numbers than expected as the rebuilding effort gets fully underway," he said.

The complete CMI report for November 2012 contains the full commentary, complete with tables and graphs. CMI archives may also be viewed on NACM's website.

About the National Association of Credit Management

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. Its annual Credit Congress is the largest gathering of credit professionals in the world.

NACM has a wealth of member experts in the fields of business-to-business credit and law. Consider using NACM as a resource in the development of your next credit or finance story.

Source: National Association of Credit Management

Contact: Caroline Zimmerman, 410-740-5560

Website: www.nacm.org

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