I believe we’re settling into a bit of a pattern, and it wouldn’t surprise me if we see real growth in April or May.
COLUMBIA, Md. (PRWEB) March 03, 2021
The rollout of COVID-19 vaccinations has been more difficult than anticipated. In turn, the lifting of pandemic protocols and economic recovery have been delayed. The February National Association of Credit Management’s Credit Managers’ Index (CMI) reflects these setbacks, but most readings remain solid.
“The February CMI lost some of the edge noted in January’s data—similar to patterns found in many other economic indicators released thus far this year,” said NACM Economist Chris Kuehl, Ph.D. “Overall, the latest CMI numbers are not bad and many of the index’s sub-readings are historically high.”
Kuehl said the “burst of enthusiasm” over the COVID-19 vaccine distribution was likely behind January’s high scores—enthusiasm that later dissipated with vaccine distribution complications nationwide.
“We saw declines with the service sector because people are realizing these shutdown protocols are going to last a little longer than we thought,” Kuehl said. “I believe we’re settling into a bit of a pattern, and it wouldn’t surprise me if we see real growth in April or May.”
Although muted optimism may account for February’s dip, data still show manufacturing, construction and transportation sectors are recovering and were not hit as hard by the 2020 pandemic-induced recession. Service sectors remain the hardest hit, and its small rebound at the end of last year and the start of 2021 has faded.
The CMI combined index slipped from 59.7 to 57.5, but the reading remains in line with three of the past five months. Similarly, the combined index of favorable factors (65.3), down 4.4 points since January, closely aligns with December’s reading (65.7). Likewise, the combined index of unfavorable factors (52.2) nearly mirrors December (52.5) with only a 0.8-point slip from last month.
“Subsectors show a fairly universal pattern,” Kuehl noted. Although most of the combined favorable subsectors fell slightly, all of them remain comfortably in expansion territory. Even with a 6-point decline month on month, the sales category (69.9) remains robust and a far cry from the 20 recorded in April 2020, Kuehl said. Dollar collections (59.2) took the biggest hit with a 6.8 decline, dropping out of the 60s, where it had been since July 2020.
This downward move creates some concern after nearly seven months of steady growth, Kuehl said. “It would appear that some companies have reached the end of their rope and are showing a little distress. He added companies were likely becoming “cashflow protective” similar to February and March of last year.
Combined unfavorable subsectors also remain in expansion territory. Rejections of credit applications changed very little, going from 51.6 to 51.5. This is good news given that new applications are down a little, and it suggests that most of those companies seeking terms are acceptable credit risks, Kuehl said. There was a little dip in the accounts placed for collection category as it went from 52.9 in January to 51.6 this month. Although these numbers are in the expansion zone, they are trending in the wrong direction, Kuehl added. The reason being that businesses were in trouble last year and are still in jeopardy for the coming year. The disputes numbers showed a promising shift as they went from 50.9 to 51. And dollar beyond terms experienced a fairly dramatic decline, going from 58.9 to 52.
“There are more companies facing stress and falling behind in their obligations, especially those in the service and retail sectors,” Kuehl explained. “Overall, unfavorable subcategories have not declined to the same extent as some of the favorable subcategories.”
Overall, Kuehl contributes the February CMI’s dip to the index’s favorable categories, which reflect immediate business prospects for companies seeking trade credit. “Even in the worst of conditions, unfavorable categories could take two to three months to manifest,” he said.
“Even with the drop this month, it only went back to the numbers we saw in November and December,” Kuehl said. “It’s not like it was an utter collapse. Credit managers are making decisions whether to give people 60-, 90- or 100-day terms; that’s still a pretty positive assessment. People are thinking things will be more normal in May or June. That’s the prevailing wisdom.”
For a complete breakdown of the manufacturing and service sector data and graphics, view the February 2021 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