Now that May’s growth has carried forward into June, it is safe to assume that the progress noted last month was genuine and that provides some interesting opportunities for the economy going forward.
Columbia, MD (PRWEB) June 27, 2013
The June Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) confirms that the significant growth reported in May was genuine. The June CMI reached 56.1—not as dramatic a jump as last month, but still trending in the right direction. The reading is now as high as it has been since before the recession started to drag the economy down.
The index of favorable factors dipped a little, but remained above 60 at 60.8 which bodes very well for the future. Sales remained well above 60, even though the factor slipped slightly from 63 to 62.3, while new credit applications also fell from 59.2 to 58.8. Dollar collections was basically stable, rising from 59.2 to 59.3. Finally, amount of credit extended fell from 65.0 to 62.8. This has been perhaps the steadiest of the favorable factors given its narrow range over the last year: a low of 60.8 in April, with a high of 65.0 in May.
“The credit industry is one of those harbinger sectors,” said NACM Economist Chris Kuehl, PhD. “Movement in the economy is heralded by movement in credit—positively and negatively. In the early days of the recession, the collapse in credit signaled what was to come as the CMI was plunging into the 40s and 30s before the rest of the economy really knew what had hit it. Now there is solid multi-month evidence of a resurging credit sector and that will likely lead to more overall economic progress.”
The index of unfavorable factors jumped to a two-year high from 51.6 to 53.0, and all but one factor improved. “It is really hard to overstate the significance of these readings given the place that credit management holds in the overall economy,” said Kuehl. A rise in rejections of credit applications from 50.8 to 52.6 indicated that while fewer credit applications were submitted, more were accepted. “In a nutshell, there are more companies with good credit applying now, and that is a positive sign for everybody,” Kuehl noted. Accounts placed for collection improved from 50.6 to 53.9, a level not been seen in over 21 months. Disputes moved out of the 40s for the first time since February, from 48.5 to 51.9, another sign that there is less tension within the ranks of the credit department. Dollar amount of customer deductions also moved out of the 40s for the first time since February to 52.5. Filings for bankruptcies stayed roughly the same, moving up slightly from 56.0 to 56.8. The declining factor was dollar amount beyond terms, which saw a big drop from 54.1 to 50.5, suggesting that some credit departments are cutting key customers a bit of slack and allowing more flexibility than in the past.
“In May, the index set recent records in a host of factors leaving only two real interpretations available: either something positive was developing in the economy as a whole, or that something had gone terribly wrong,” said Kuehl. “Now that May’s growth carried forward into June, it is safe to assume that the progress noted last month was genuine and that provides some interesting opportunities for the economy going forward.”
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