NACM's Credit Managers' Index (CMI) gained two points in March. Following four months of fluctuations, the March CMI reached its second-highest combined score in a year and just half a point shy of the highest seen in January.

"It is normally the task of the economist to find the dark cloud that surrounds the silver lining," said NACM Economist Chris Kuehl, Ph.D. "But numbers this month look far better than anybody had expected and indicate credit professionals are finding their footing on a path back to normalcy."

Three of the four combined favorable factors bounced back from the February dip, creating a combined score of 67.7. Dollar collections and sales were among the most improved. Amount of credit extended also saw a slight gain, while new credit applications decreased.

More than half of the combined unfavorables categories also increased in March, most notable was dollar amount beyond terms and accounts placed for collection. Bankruptcy filings and credit application rejections also saw gains. Disputes, however, dropped less than half a point, while dollar amount of customer deductions fell slightly more. Overall, combined unfavorables scored 53.8.

"The truly encouraging news is that unfavorable categories have had five consecutive months of readings 50 and above," Kuehl said. "Not one of the readings has been in the contraction zone since October 2020. This bodes very well for future economic growth readings."

The manufacturing sector saw a small increase to 59.2 in March. Dollar collections and sales were the only favorable factors to increase. Amount of credit extended dropped just over a point, followed by a 4.5-point drop in new credit applications. In total, manufacturing favorables scored 67.1, while combined unfavorables scored 54.

Kuehl credited the unfavorables score in large part to increases in accounts placed for collection, dollar amount beyond terms and credit application rejections. Bankruptcy filings also improved. The only two unfavorables to decline were the dollar amount of customer deductions and disputes, both nearing contraction territory.

"The sectors that have performed well through most of the last several months have been in manufacturing," Kuehl said. "This has been explained in part by the fact consumers have been unable to spend as they usually do on services."
Prior to the pandemic lockdown, on average, about 65% of consumers' disposable income was spent on services, Kuehl added. "The higher the income, the more spent on services as opposed to things."

With a three-point gain to 59.4, the service sector, however, did exceedingly well last month, which is likely attributed to the extensive gains in all four favorable factors, he noted.

Dollar collections saw the most extensive increase by nearly nine points, while sales achieved the highest reading for the sector. Amount of credit extended also increased, followed by new credit applications.

The CMI reflects retail and other services less affected by pandemic shutdowns more than some of the other service areas such as hospitality, entertainment or the restaurant trade, Kuehl pointed out.

Unfavorables reached its highest score since March 2020. Credit application rejections was the only unfavorable to decrease, and dollar amount of customer deductions held. However, dollar amount beyond terms increased by nearly six points, while accounts placed for collection jumped three points. Bankruptcy filings and disputes saw minimal gains.