Credit managers across the U.S. are reporting what could be a positive holiday season after multiple improvements in the latest Credit Managers’ Index from the National Association of Credit Management.

The Credit Managers’ Index (CMI) is trending upward as 2019 comes to a close. NACM’s CMI improved for the second consecutive month in November, up nearly a full point from October. The combined reading now sits at 55.5 compared to 54.6 the previous month, while the manufacturing sector improved to its highest reading since August 2019. This is the CMI’s best showing since a 1.6-point jump in May 2019.

“The CMI is the current ray of economic sunshine,” said NACM Economist Chris Kuehl, Ph.D. “This is important given the tendency for the CMI to predict the future a little more accurately than many other surveys.”

In the combined CMI, favorable factors led the way with a 1.5-point increase, despite a decent drop off in dollar collections. Sales and new credit applications moved back into the 60s, while amount of credit extended continued to climb to its third-highest score since November 2018. Meanwhile, the unfavorables were paced with growth in accounts placed for collection, disputes, dollar amount beyond terms, dollar amount of customer deductions and fillings for bankruptcies. Rejections of credit applications dropped a tad; disputes rejoined expansion territory (score above 50).

“This month marks the first time that five of the six unfavorable readings have been in expansion territory in nearly three years,” said Kuehl. “The only category in contraction now is accounts placed for collection. It is unlikely this signals a new period of rapid growth for the economy, but it does reduce the potential for a serious recession.”

The manufacturing sector improved slightly, but this is good news according to Kuehl. “By most accounts the sector has been struggling, and for a variety of reasons. The most pressing of late has been the impact of the trade war with China. The worker shortage has also played a major role and most of the manufacturing data has been troubled. The fact that the CMI is trending in a positive direction is a welcome surprise.” Sales and new credit applications improved in November, but dollar collections dipped modestly while amount of credit extended remained the same. While not all unfavorables were in expansion territory, the two with a score below 50 improved—disputes up nearly three points. Rejections for credit applications and dollar amount of customer deductions were the only two factors to decline.

The service sector is being led by retail and the upcoming holiday season, noted Kuehl. “Retail sales have been up in general although there has been somewhat less interest in the high-dollar items that drove holiday sales in past years. The CMI data on the service sector tends to be weighted towards the retail community as well as health care and construction. The data seems to be mirroring what the retailers are reporting.” All four favorable factors were back in the 60s for the first time since August 2019; however, dollar collections dropped significantly from 65.5 to 61.7. Much of the joy can be found in the service unfavorables, which saw accounts placed for collection and disputes jump into the expansion zone.

“The good news [for the service sector unfavorables] is that all of the readings are now in the 50s for the first time in three years, a development that promises decent numbers in the months to come,” said Kuehl. “There will likely be some slowdown once the holiday season is over, but the decline may not create as much angst as last year.”

For a complete breakdown of the manufacturing and service sector data and graphics, view the November 2019 report.