A Rattled Service Sector Brings Decline in March CMI
Credit professionals were left a little shaken in the March 2019 economic report from National Association of Credit Management, as the service sector rattled readings.
COLUMBIA, Md., March 29, 2019 /PRNewswire-PRWeb/ -- NACM's Credit Managers' Index (CMI) sensed some discomfort among credit professionals in March, particularly in services where steep drops in favorable and unfavorable factors brought the sector to an annual low. The CMI's combined score of the manufacturing and service sectors fell to its second-lowest reading (53.6) since March 2018, raising more questions than answers, according to NACM Economist Chris Kuehl, Ph.D.
Combined sales and dollar collections dropped drastically in the favorables category to 58.2 and 56.6, respectively, the latter holding the lowest score in overall favorables. The combined amount of credit extended (63.5) was the only favorable to show improvement, but could not keep the combined favorables score from dipping into the high-50s. Combined unfavorables slipped back into contraction territory (a score below 50) yet remains on the brink of expansion after a modest recovery in February. Similar to the favorables, only one unfavorable increased—disputes at 49.5—albeit minimally. Accounts placed for collection (46.4) was hit the hardest in March, followed by dollar amount beyond terms (50) and bankruptcy filings (53.7).
"The challenge [in March] is that much of the other economic data is telling the same story," Kuehl said. "There is a low expectation for first quarter GDP and reductions in the readings that are coming from the Purchasing Managers' Index as well as data from industrial output to capacity utilization. Maybe we should be glad this month wasn't worse."
Despite a slight downgrade, the manufacturing sector stayed relatively the same in March at 54.6, only 0.2 points lower than the prior month. Kuehl said the unfavorable factors were behind the manufacturing decline as favorables improved by 0.3 points for a score of 60.3. Sales (58.4) and dollar collections (57.8) both suffered after climbing into the low-60s in February; however, new credit applications (61.2) continued to rise for a second consecutive month, while the amount of credit extended (63.9) jumped to its highest reading since November 2018. Two out of the six unfavorables—disputes (50.2) and bankruptcy filings (54.6)—allowed the manufacturing sector to hold steady against a substantial 3.7-point drop in accounts placed for collection.
In the service sector, favorables dragged the overall score down nearly 2.5 points to 52.6. April 2018 previously held the lowest reading over the past year, a title now held by March 2019. All four favorables worsened, most notably sales with a 5.5-point decline to 58. New credit applications fell by about five points to 54.3, followed by the amount of credit extended (63.2) and dollar collections (55.5). After swimming in and out of contraction over the past four months, unfavorables landed at 49.1, showing only slight gains in disputes. Bankruptcy filings were particularly concerning, having thrived in February only to sink to 52.7 in March.
"The hope is that next month trends back up, but with all the other generally down data that has been coming out of late, that doesn't seem all that likely," Kuehl said.
For a complete breakdown of the manufacturing and service sector data and graphics, view the March 2019 report at http://web.nacm.org/CMI/PDF/CMIcurrent.pdf. CMI archives may also be viewed on NACM's website at http://www.nacm.org/cmi/cmi-archive.
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Source: National Association of Credit Management
SOURCE National Association of Credit Management
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