The credit decision is very early in the business process and thus signals future intent. The sense thus far is that all the political turmoil did not have an impact on the future plans for business.
Columbia, MD (PRWEB) October 31, 2013
Despite the threat of a political impasse in the United States that some thought could derail the entire global economy, October’s Credit Managers’ Index (CMI), issued by the National Association of Credit Management (NACM), was largely unfazed. The combined CMI improved from 56.6 in September to 56.7 in October, marking the highest reading in over a year and a half.
The October CMI may have been the most watched in years, according to NACM Economist Chris Kuehl, PhD. “The dominant story for the bulk of the last quarter was the political impasse that resulted in a government shutdown for three weeks and posed a threat to the U.S. credit rating,” he said. “Everyone was hanging onto the edge of their seats to see what this would do to the economy. Predictions ranged widely from utter financial chaos to no real response at all.”
Recent declines in retail, consumer confidence and industrial production seemed to bear out the most pessimistic predictions, but the CMI tends to lead other indicators by approximately three months. There was a slight drop in July’s CMI readings, signaling some anxieties in the financial community about the then-looming threat of a government shutdown or default, but that was followed by successive increases in August, September and now October. “The credit decision is very early in the business process and thus signals future intent,” Kuehl said. “The sense thus far is that all the political turmoil did not have an impact on the future plans for business.”
The most surprising data in this month’s CMI came in the favorable factors index, the combined reading of which increased from 60.9 last month to 61.5 in October. Sales slipped just slightly from 62.7 to 62.5, but managed to stay above 60, as it has since April. The CMI’s best news came in the new credit applications and amount of credit extended readings. New credit applications rose from 57.4 to 58.5, signaling that more companies are seeking additional credit in order to grow their business. “This alone would not be cause for great celebration as there are many occasions that companies seek credit but are doing so from a position of weakness,” Kuehl said. “The better news is that amount of credit extended also increased from 62.9 to 63.8, suggesting that those asking for additional credit are good companies with solid credit ratings. These are the companies expecting improvements in the economy by next year.”
If the October CMI reflected any of the negative economic effects of the political brinksmanship in Washington, it did so in the unfavorable factors. The overall unfavorable index declined from September’s 53.8 to October’s 53.6 driven by rejections of credit applications, which slipped from 53 to 52.1, and accounts placed for collection, which fell from 54.3 to 53.3. “More companies are having issues, which may be directly related to the government shutdown and related stress given that 156,000 companies do work for the government,” Kuehl said. Still, disputes, dollar amount beyond terms and dollar amount of customer deductions all registered increases, and the unfavorable index itself has by and large remained stable and trending in the right direction.
ABOUT THE NATIONAL ASSOCIATION OF CREDIT MANAGEMENT
NACM, headquartered in Columbia, Maryland, supports more than 15,000 business credit and financial professionals worldwide with premier industry services, tools and information. NACM and its network of affiliated associations are the leading resource for credit and financial management information, education, products and services designed to improve the management of business credit and accounts receivable. NACM’s collective voice has influenced federal legislative policy results concerning commercial business and trade credit to our nation’s policy makers for more than 100 years, and continues to play an active part in legislative issues pertaining to business credit and corporate bankruptcy. Its annual Credit Congress is the largest gathering of credit professionals in the world.