The good news is that the financial distress at the start of the year has not triggered a wave of business failure, and now that seems even less likely.
Columbia, MD (PRWEB) August 29, 2014
Consistency is generally a positive development when the overall readings have been positive and this is the case for the August report of the Credit Managers’ Index (CMI) from the National Association of Credit Management, which posted no change from July’s 56.8. This marks five months of readings between 56 and 56.8 and given the volatility in the economy as a whole for this period, this stability in credit is a positive signal as far as the rest of the year is concerned.
“The August CMI reflects a more optimistic future, but not an economy that is likely to surge,” said NACM Economist Chris Kuehl, PhD. “In comparing this month’s reading to that reported by the Federal Reserve, it is easier to understand the optimism about the last half of the year, as well as the worry about the impact of inflation fueled by some of this growth.” Nearly all the index’s readings reflect that same stability, though there was noteworthy movement in both the favorable and unfavorable factor indices. Kuehl noted the same stability in various important data streams—capacity utilization between 78% and 79.7% over this period—just a little shy of what is considered normal. Stability also appears in terms of capital expenditure. “These measures stand in stark contrast to the wild gyrations in the overall growth rate as first quarter numbers were in recession territory at -2.1%, while the second quarter boasted a gain of over 4%,” Kuehl said.
The favorable factor index improved only very slightly from 63.7 to 63.8. Sales dipped from 65.2 to 64.8, but that is still trending toward the high side as far as the last several months are concerned. There was also a significant dip in new credit applications from 62.4 to 60.9, but it remains above 60. Dollar collections and amount of credit extended both registered gains from 61.0 to 62.7 and 66.1 to 66.7, respectively. This is the second straight month that favorable factors remained in the 60s and points toward a better end to 2014 than the start.
The unfavorable factor index was similarly unchanged from last month, but falling instead of rising from 52.2 to 52.1. This consistency suggests that none of the economic concerns that started the year have been sufficiently serious to drag the economy down. Just as with the favorable readings, there was more movement within the individual factors. Rejections of credit applications slipped from 52.1 to 51.9, seemingly reflecting an increase in marginal companies trying to obtain credit. Accounts placed for collection improved from 51.5 to 52.1—a good signal that fewer accounts are getting into real trouble. Disputes remained stable, rising from 50.3 to 50.6, but dollar amount beyond terms slid from 51.1 to 50.3. This is getting too close to contraction territory for real comfort, but no cause for alarm, noted Kuehl. Dollar amount of customer deductions slipped below 50 from 50.6 to 49.9. That marks the first time for a slip into contraction territory since June. For the last year it has been staying pretty close to the 50 point and will likely bounce back in the coming months. Finally, filings for bankruptcies slipped, barely, from 57.6 to 57.5. “The good news is that the financial distress at the start of the year has not triggered a wave of business failure, and now that seems even less likely,” Kuehl said.
Concerning the manufacturing and service sectors, neither saw significant change in the overall index reading, but individual factors fluctuated more widely. For a full breakdown of the manufacturing and service sector data and graphics, view the complete August 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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