When there is a collapse as complete and dramatic as the one experienced in the second quarter of this year it becomes nearly impossible to make sense of the data that comes in afterward. The truth is that data will be hard to interpret for a while as we wait for some sense of normalcy to return.
COLUMBIA, Md. (PRWEB) October 01, 2020
Although still in positive territory, the September Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) remains above levels recorded for the same month last year. However, September marks the first CMI decline since April, landing at an even 56. The half-point fall from August brings the CMI score slightly under February’s U.S. pre-pandemic data. Like many other indicators, and despite the slight decline in September, the CMI is still trending positively in expansion territory.
“When there is a collapse as complete and dramatic as the one experienced in the second quarter of this year it becomes nearly impossible to make sense of the data that comes in afterward,” said Chris Kuehl, Ph. D., NACM economist. “The truth is that data will be hard to interpret for a while as we wait for some sense of normalcy to return.”
The combined favorable factors improved from 62.9 to 63.3, despite the decline in amount of credit extended, which slipped from 61.3 to 60.8. Sales was down slightly to 65.5, which is still higher than it was a year ago. New credit applications increased slightly to 63.6. Dollar collections was the big winner of the month, increasing more than two points to 63.3—better than September 2019.
Overall, the unfavorable factors slipped from 52.2 to 51.1 in September. Accounts placed for collections and disputes, sank into contraction territory, with scores under 50. While still in expansion territory, dollar amount beyond terms tumbled from 58.2 to 54.6. Rejections of credit applications improved slightly to 51.6, and dollar amount of customer deductions dropped to 51.1 from 52.2. Surprisingly, filings for bankruptcies improved from 47.7 to 51.3.
“There was a dramatic fall in the favorable factors as the crisis emerged, but the unfavorables didn’t respond as negatively at first,” Kuehl said. “Now, the unfavorable factors are becoming the problem and the favorables are carrying the load. The initial impact of the shutdown was felt in every category from sales to applications, but issues like bankruptcies and collections took a little longer to develop.”
On the manufacturing side, five of the six unfavorables saw a decline in September. Accounts placed for collection (49.4), disputes (48.1) and dollar amount of customer deductions (49.8) each dipped back into the contraction zone. Rejections of credit applications at 51.7 and dollar amount beyond terms at 52.3 stayed in expansion territory, but the latter dropped 5.5 points. Filings for bankruptcies improved from 47.9 to 51.6, helping the overall unfavorables stay afloat at 50.5.
The manufacturing favorables improved half a point to 62.5, led by a jump from 61.3 to 63.9 in dollar collections. Sales declined by more than two points to 65.1, while new credit applications rose slightly to 60.8. Amount of credit extended increased modestly to 60.3. In total, the manufacturing sector declined from 56 to 55.3. “The manufacturing sector has been far less affected and, in some respects, has been benefiting from the shift in consumption from paying for services to spending on goods,” said Kuehl.
The service sector saw a climb in sales from 64.3 to 65.9, and new credit applications remained basically unchanged at 66.4. Dollar collections improved nearly two points to 62.6, and amount of credit extended tumbled more than two points to 61.3. The favorables continued to climb to 64.1. The combined service sector index dipped two-tenths of a point to 56.7.
The service sector’s unfavorables saw two factors slip back into contraction territory: accounts placed for collection at 49.4 and disputes at 49.3. Rejections of credit applications inched forward to 51.5, while dollar amount of customer deductions declined a tenth of a point to 52.4. Dollar amount beyond terms dove a point and a half to 57, and filings for bankruptcies improved from 47.6 to 50.9. The unfavorables as a group dropped to 51.8 from 52.2.
“The service sector remains the most stressed and vulnerable,” said Kuehl. “Travel and tourism have not recovered to the levels set at the first of the year, and there continues to be severe contraction in the hospitality segment. Retailers are seeing progress, but they continue to worry about the chances for another lockdown.”
For a complete breakdown of the manufacturing and service sector data and graphics, view the September 2020 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