This bodes pretty well for the coming months, as long as nothing affects sales numbers drastically.
Columbia, MD (PRWEB) August 30, 2013
The National Association of Credit Management's (NACM's) Credit Managers’ Index (CMI) for August returned to the growth patterns of earlier this summer. The numbers look impressive again, and the index sits at 56.4, up nearly a full point from July’s 55.5. The last few months were a little volatile, but not unexpected. The surge that kicked off the summer was based primarily on expectations, but as the second quarter came to an end there was some fear that business anticipated too much, too fast. The big jump from the April index’s 53.3 to May’s 55.6 was followed by a couple of months that looked OK, but which didn’t carry the momentum forward significantly. July now looks like a month that gave businesses a chance to regroup and consider what the rest of the year would really look like, as the August numbers are the best in over 18 months, and higher than the previous peak in June.
Sales returned to early summer levels, bouncing up to 63.1 after falling below 62 last month. This is a level not seen in well over a year and a half. New credit applications also jumped, though not as dramatically, and remains a little under the record pace it set in May. The current reading is 58.7, only a little below May’s 59.2. Another good sign is that dollar collections jumped into the 60s for the first time since the recession started, sitting at 60.4. The last of the favorable categories, amount of credit extended, showed substantial improvement, although this month did not break the record set in May when it reached 65. The current reading is 63.3, almost a full point better than last month. Overall, the index of favorable factors is back in the 60s. At 61.4, it is the highest level reached in well over two years.
Some important trends showed up in the unfavorable factors index as well. The gain noted in new credit applications, a favorable factor, was somewhat tempered by the lack of progress in rejections of credit applications, which retreated from 53.2 in July to 52.7 in August. “This suggests that some troubled companies are trying to access credit in the hopes they will see a turnaround sooner than later,” said NACM Economist Chris Kuehl, PhD. There was also some decline in accounts placed for collection, from 53.6 to 52.5, again suggesting some companies are struggling this summer. “As noted in last month’s report, a pattern is developing that will test weaker companies. As major competitors make their move, the others in that sector will struggle to hang onto their market share, and some will be better prepared than others,” he said.
The rest of the unfavorable factors showed some progress. Disputes improved from 51 to 51.6. Dollar amount beyond terms made a substantial recovery after slumping to 48.5 in July. It now stands at 51.1—not a record breaker by any stretch, but trending in the right direction, Kuehl noted. Dollar amount of customer deductions also made a very slight gain from 51 to 51.4. Finally, filings for bankruptcies trended slightly higher, from 58.2 to 58.7.
Overall, the index of unfavorable factors was mostly flat, improving slightly from 52.6 to 53. The majority of the action in August was in the favorable categories, while the unfavorable numbers stayed roughly the same. “This bodes pretty well for the coming months, as long as nothing affects sales numbers drastically,” Kuehl said.
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.