According to the latest Credit Managers’ Index, overall CMI slipped again in May and is now sitting at levels last seen in January of this year and about where the CMI was a year ago. “The gains made in the last year have largely been erased and now the question is whether there will be a swift and significant comeback,” said NACM Economist Chris Kuehl, PhD.

“The drop from 55.1 in April to 54.6 in May is not quite as steep as the one from 56.2 in March to 55.1 in April, but the decline is worrisome nonetheless.”

If there are silver linings in this month’s report it is that favorable factors did not change much—the favorable index retreated from 60.5 to 60.2. Sales data actually improved from 60 to 61.2, but remains off the pace set earlier in the year when sales hit 64.4. Even better news came from new credit applications, which rose from 58.2 to 59.9. The retreat, and the bad news, was due largely to the decline in the amount of credit extended—down from 64.6 to 61.3. Part of that decline can be attributed to less credit being requested, and more of those asking for credit being denied.

May’s data indicated more turmoil in the index of unfavorable factors compared to April’s slight shift, said Kuehl. “As suggested last month, the majority of the business community lacks the flexibility to handle many weeks of downturn before there are problems, and this month’s unfavorable factors show that this is the case,” he noted.

Dollar amount beyond terms fell into contraction territory from 50 to 48, as did disputes, which fell from 50.7 to 49.4. Most factor numbers dropped a little, but a big change in dollars beyond terms often signals more issues to come. In the end, the total index of unfavorable factors slid from 51.6 to 50.9. This is not catastrophic, as this is close to where the readings have been for the past year, but there had been hope of some serious recovery gains by this point, not a reversal.

At 50.9, the unfavorable factor index is less than a point from sliding into contraction territory—a place the index has managed to avoid since October 2011.

“The sense of the index for this month is that nothing has developed to perk the economy up, but neither is there evidence of an imminent crash,” said Kuehl. “The gains made in the first few months have proven to be more ephemeral than expected and many have concluded that 2012 will not break the ‘spring swoon’ pattern. The next challenge is to determine if this will be a long and difficult summer as in both 2011 and 2010. Nobody seems quite ready to make that declaration just yet.”