Given that the CMI is often predictive, it would appear that economic conditions for the coming months will continue tracking in a positive direction.
Columbia, MD (PRWEB) July 31, 2014
The Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) improved to 56.8 from 56.1 in July. The readings for the favorable and unfavorable factor indices improved, from 62.4 to 63.7 for the favorable factor index, marking the highest point in over four years, and from 52.0 to 52.2 for the unfavorable factor index. The latter being below marks set earlier in the year, but is at least trending in the preferred direction.
“The overall sense is that real progress in economic recovery is being made and the future looks brighter,” said NACM Economist Chris Kuehl, PhD about the July CMI report. “But, not to rain on the parade, these numbers also looked good at the start of the year, and it has taken until mid-summer to regain that momentum.” Winter weather was partly responsible for this struggle, as was the significant decline in exports of American goods, Kuehl noted. “The rebound in exports played a major role in getting the US back to growth, but the caution is that many of those importing nations are still not in very good economic shape,” he said.
Significant readings within the favorable factors promise better days ahead. Sales improved from 63.9 to 65.2, back to the level set in May. “The sales reading has been strong for some months and that bodes well as sales will underpin any kind of real progress in the months to come,” Kuehl said. New credit applications improved from 61.5 to 62.4, the second straight month above 60 and at a yearly high. Dollar collections got back on track and crested above 60 again, moving from 59.3 to 61.0. Finally, amount of credit extended jumped dramatically from 64.8 to 66.1. “This is the highest reading since the recession and suggests far more credit access than before,” Kuehl said. “This tracks with the data that comes from the Federal Reserve on bank lending in general and that is very solid news for the economy as a whole.”
The unfavorable factor index details are also instructive, just not as dramatic. The good news is that all of the factors that had fallen into contraction (below 50) returned to expansion territory. Disputes improved from 49.5 to 50.3, dollar amount beyond terms jumped from 49.6 to 51.1 and dollar amount of customer deductions rose from 49.4 to 50.6. Rejections of credit applications also improved, but barely, from 52.0 to 52.1. “Given the large hike in amount of credit extended, it appears there are still unworthy applications to credit issuers, but those that are acceptable seem to be asking for more credit than in the past,” Kuehl said. Two factors fell. Accounts placed for collection declined from 52.5 to 51.5, indicating remaining strain in the creditor community and filings for bankruptcies fell from 58.9 to 57.6. “This remains a pretty healthy reading, but also suggests that not every sector of industry in the country is in the most robust of health,” Kuehl said.
“There is a growing sense of confidence in the progress of the economy right now, although there are still many who see dark clouds behind the silver linings,” Kuehl said. “The latest data releases all seem to point toward the kind of rebound expected by analysts at the start of the year. The level of consumer confidence is at a point not seen since before the recession hit and despite gasoline prices spiking for a part of the survey period. The latest GDP numbers were far higher than expected with a whopping 4% gain in Q2 that offset the decline in the first quarter, which was revised to 2.1%.”
“The CMI has joined this parade with a set of readings that mark highs not seen in over a year in some cases,” Kuehl said. “Given that the CMI is often predictive, it would appear that economic conditions for the coming months will continue tracking in a positive direction.”
For a full breakdown of the manufacturing and service sector data and graphics, view the complete June 2014 report at http://web.nacm.org/CMI/PDF/CMIcurrent.pdf. CMI archives may also be viewed on NACM’s website at http://web.nacm.org/cmi/cmi.asp.
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