National Association of Credit Management’s Credit Managers’ Index (CMI) faltered a bit in September after a robust showing the previous month.

“That gain was short-lived as this month there was a bit of a decline. The data is still pretty firmly in the expansion zone, but not as robustly as was the case earlier,” said NACM Economist Chris Kuehl, Ph.D.

The combined CMI slipped from 55.2 in August to 54.1 in September.

“The numbers are not as good as they were in August, but they have hardly fallen off the map,” Kuehl said of the favorable categories.

All four favorables — sales, new credit applications, dollar collections and amount of credit extended —declined below the 60 mark. Sales was hit the hardest slipping more than 10 points from September 2018 and nearly six points month-to-month. Overall, the favorable factors dropped roughly three points from August. Meanwhile, the unfavorables only declined two-tenths of a point and remained in expansion territory (a score over 50). Disputes, dollar amount of customer deductions and filings for bankruptcies all improved in September.

“[Dollar amount beyond terms] is [worrisome] in that slow pays are the first sign of future problems,” Kuehl added.

Manufacturing was hampered by setbacks in both the favorables and unfavorables. The index saw its overall reading dip more than a point.

“The sense is that trends will be more negative as the trade war grinds on and more tariffs come into play,” Kuehl said. Again, sales pulled the sector’s index down substantially YoY and MoM, while the other three categories only stepped back modestly. Once more, Kuehl mentioned slow pays as an issue, “and thus far there are a few major alarms sounding.” The unfavorables dropped half a point and stayed in the expansion zone.

The service sector also had signs of weakness; however, the unfavorables improved by a tenth of a point. Filings for bankruptcies improved slightly in September. “The success of the retail season will determine whether there will be more bankruptcies toward the beginning of next year,” Kuehl noted. Dollar amount beyond terms dipped below the teetering point and entered contraction territory (scores below 50). “The retail sales numbers will climb, but the question will be by how much and for how long,” Kuehl said. “If the season is not quite what had been expected, the nonfavorable factors will likely show the strain—perhaps even experiencing a hike in bankruptcies in the retail community. The other service category that shows strong influence over the CMI is construction. This area may decline simply due to seasonal factors.”

While much of the decline in September is due to the lack of sales and favorable factors lagging in all three indices, data is still quite strong and above the lull that was seen in July. “The data this month was slightly less impressive than last month, but the declines were not steep,” Kuehl said. “The exception was that sales numbers tanked, and that worries analysts down the road.”

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