NACM's Credit Managers’ Index for February Rebounds to December’s Level

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The National Association of Credit Management’s economic report for February 2013 depicts a stalled economy. Political and economic concerns appear to weigh more heavily on the manufacturing sector, while data from the service sector shows progress.

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A couple of conclusions can be reached from the can ignore political gyrations and grow anyway, or it means that the economy would be growing that much faster if all the political histrionics were not a factor.

The National Association of Credit Management’s (NACM’s) Credit Managers’ Index (CMI) for February is exactly the same as it was in December—54.9. This is just slightly better than it was in January when the index fell to 54.6. For all intents and purposes, the readings suggest that the economy has stalled. The interesting movements are in the individual factors where there is actually some better news overall. The favorable factor index is up to just below where it was in November, at 59. This is a slight improvement from January, and the gains occurred in important factors.

Sales jumped, taking the reading back to last year’s levels. “The strength of this indicator can’t be overlooked, as this signals substantial activity despite all the concerns registered over the ‘fiscal cliff,’ the debt ceiling and the sequester” said NACM Economist Chris Kuehl, PhD. “However, the impact has been hard to figure out. On the one hand, it is pretty obvious that the lower GDP number from the fourth quarter was directly related to fiscal cliff concerns within the business community, but the latest revisions show no dip into recession as first thought.” The data coming from the Purchasing Managers’ Index shows similar variability, and other signs within the rest of the CMI’s favorable factors point to continued confusion and caution, Kuehl noted.

The unfavorable factor index rose from 51.9 to 52.2. In general, there was either significant progress or stability in the factors. Of note, rejections of credit applications fell, but it is still higher than the majority of the readings in the last year. The trend seems to indicate that most of those seeking credit are qualified and most are getting the credit they apply for. “The overall impression is of a steady state, with a slight movement in a positive direction,” said Kuehl. “What makes all of this interesting is that it is taking place against a backdrop of political drama that many believe will cause serious economic dislocation before all is said and done, and it seems to be the manufacturing sector that is harboring the most concern.”

Decisions in manufacturing have to be made in advance, making this industrial sector generally more cautious and reluctant to make long-term plans. The negatives that caused the manufacturing index to decline just slightly to 53.6 seem to have come from the sector’s favorable factors, the most serious of which was new credit applications, which slipped to the lowest since November and the second lowest in the last year. “The overall takeaway for the manufacturing sector is that there appears to be some pent-up demand for growth, but there are also inhibitions that seem to stem from the political wrangles,” said Kuehl.

In the service sector, there was some pretty good news, with the gains helping to offset the slips in the manufacturing data. The service sector index improved to 56.2, resulting in the combined index looking more positive. The most impressive gain occurred in sales given that this is not the strong season for the retail community. The sense from the service side is that some of the more stressed sectors are making a bit of a comeback, with housing at the top of the list.

“A couple of conclusions can be reached from the data,” said Kuehl. “It is either a testament to the fact that business can ignore political gyrations and grow anyway, or it means that the economy would be growing that much faster if all the political histrionics were not a factor.”

The complete CMI report for February 2013 contains more commentary, complete with tables and graphs. CMI archives may also be viewed on NACM’s website.

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.

Source: National Association of Credit Management


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Caroline Zimmerman

Jake Barron, CICP, Government Affairs Liaison
National Association of Credit Management
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