The Credit Managers’ Index from the National Association of Credit Management for June 2021 notes further slowdown in most categories but overall numbers remain strong.
Current assessments of the U.S. economy visualize it as on fire, and the question that begs asking is: How long will it last? Credit managers have started to provide an answer to this question via NACM’s Credit Manager’s Index (CMI) for June.
Month on month, the CMI continued to lose some ground with a total combined score of 57.5. Overall, the score for the June CMI fell 2.3 points compared with May, and 3.1 points since April.
“This is a good time to remember that credit managers are focused primarily on the future, and they seem to be getting a little nervous,” said NACM Economic Chris Kuehl, Ph.D.
The combined index of favorable subcategories went down 1.9 points since May. The sales subcategory was hardest hit with a 5.5-point drop. Amount of credit extended slipped 1.6 points month on month, and new credit applications, 1.5 points. Dollar collections with a 1.1 increase was the only category in June to see a gain.
“The fall in sales is taking place at the same time that many have been touting all the increases in sales of capital goods and strong retail numbers,” Kuehl said. “As long as the numbers are in the 60s, there is no alarm to sound, but it is clearly not headed in the right direction.”
The combined index of unfavorable factors slipped to its lowest level since February 2021. With a combined drop of 2.5 points, some unfavorable categories noted significant changes. Disputes fell close to the contraction zone as it slid 3.3 points, but dollar amount beyond terms was the only category to fall into the contraction zone.
“As usual, the more interesting data shows up in the subcategories,” Kuehl said. “A bit more desperation is showing up in some sectors, but the biggest change and by far the most worrying was dollar amount beyond terms as it fell 7.6 points. This is an early sign of distress in companies and suggests that some businesses are starting to try to protect their cash flow at the expense of their creditors.”
Dips in rejections of credit applications, accounts placed for collection, dollar amount of customer deductions, and filings for bankruptcies ranged from one point to 0.8 points. “These are still very respectable readings and do not signal any real issues,” Kuehl said. Overall, “unfavorable categories remain in decent shape, but they are no longer all in positive territory as they had been for the seven consecutive months prior.”
For a complete breakdown of the manufacturing and service sector data and graphics, view the June 2021 report here.