NACM’s January Credit Managers’ Index Soars in the New Year

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The Credit Managers’ Index from the National Association of Credit Management kicked off the new year with its highest combined score since March 2006.

The numbers signify confidence in growth as we get into the second and third quarters of 2021.

NACM’s January Credit Managers’ Index (CMI) just might be the bellwether of an economic resurgence for 2021. Its combined score reached 59.7—a result not seen since March 2006.

Despite the unprecedented declines in the manufacturing and service sectors early last year, NACM Economist Chris Kuehl, Ph.D., said both sectors are recovering at a quick pace. Kuehl attributes the recovery to the increase in business and consumer confidence related to vaccine distributions and reopening efforts.

January’s combined score jumped 1.9 points over the December 2020 reading of 57.8 and 1.3 points more than the previous high score of the past year recorded in October 2020.

Unlike the Great Recession when the financial and credit sector took a long time to recover, the reactionary COVID-19 declines were fast and steep, while recovery is quickly rocketing back up, creating a V-shape recovery versus the former’s U-shaped recovery, Kuehl said.

At the start of the pandemic, the combined CMI score plummeted from 56.2 in February to 49 in March and then to 40.6 in April—the lowest it has been since the start of the pandemic, but still slightly better than the 39.7 reached in Jan. 2009.

“All of the CMI score categories are now above 50,” Kuehl said. “To me, the numbers signify confidence in growth as we get into the second and third quarters of 2021.” Scores over 50 are considered expansion; while scores under 50, contraction.

Government assistance played a bigger role in the recovery earlier last year than today, but it certainly remains a factor, Kuehl noted. Confidence is building, increasing credit managers’ willingness to extend credit.

Combined favorable factors soared four points in January to 69.7 compared to December’s 65.3. Sales had the most significant increase from 70.2 to 75.9, followed by amount of credit extended, which grew from 65.3 to 69.2. New credit applications and dollar collections also saw gains of more than three points, scoring 67.8 and 66, respectively.

“On the manufacturing side, companies delayed capital investment last year because of all of the uncertainty,” Kuehl said. “Now, they’re getting back into it. On the consumer side, people are still buying stuff. And we’re still seeing service sector companies trying to anticipate what’s going to happen later in the year.”

With an overall score of 53, combined unfavorable factors increased half of a point in January—three of the six unfavorables decreased no more than 0.3 points. Dollar amount beyond terms and accounts placed for collection improved by more than a point, going from 57 to 58.9 and 51.6 to 52.9, respectively. Rejections of credit applications also rose from 51.3 to 51.6.

Meanwhile, the disputes category fell by 0.3 points from 51.2 to 50.9, while dollar amount of customer deductions and bankruptcy filings each fell 0.2 points from 51.3 and 52.3. Disputes measure the formal disagreements between creditors and credit issuers, and the decline is potentially related to companies that remain nervous about consumers guarding their cash flow—the worst enemy for a credit manager, Kuehl said.

“Manufacturing saw pretty significant improvement over the year partly because consumers shifted from purchasing services to purchasing goods,” Kuehl said. Consumers previously spent upward of 65% of their disposable income on services. The past year, however, found them buying goods to create home offices, room to take care of elderly relatives and home entertainment systems.

The manufacturing sector reached an overall score of 60. The sector’s favorables category rose to 70.5 due to a 5.6-point boost in sales as it went from 71.1 to 76.7 month on month. The amount of credit extended increased from 66.8 to 69.7; and dollar collections, 65.9 to 67.1. New credit applications was the only favorable category to drop, 70.2 to 68.6.

Half of the manufacturing sector’s unfavorables categories saw increases: dollar amount beyond terms (53.5 to 59.1), accounts placed for collection (51.4 to 54.1), and dollar amount of customer deductions (50.6 to 51). Declines were minimal: disputes (50.7 to 50.5), rejections of credit applications (51.3 to 50.9) and bankruptcy filings (52.8 to 52.1).

The service sector did not grow at the same level as manufacturing, but the overall score jumped more than two points from 57.1 to 59.4. The sector’s favorables categories rose the most from 62.9 to 68.9. Although sales had the highest score at 75.1, new credit applications improved the most as it jumped to 66.9, 8.2 higher than the month prior. The remaining two favorables categories also improved. Amount of credit extended went from 63.9 to 68.7 and dollar collections from 59.7 to 64.9.

The service sector’s unfavorables categories did not fare as well. Overall, the sector dropped 0.3 points to 53 and only two categories showed slight gains. Rejections of credit applications improved the most, 51.2 to 52.2, followed by bankruptcy filings, 52.2 to 52.6. While accounts placed for collection held at 51.8, dollar amount beyond terms fell to 58.8 from 60.6. Dollar amount of customer deductions and disputes also decreased from 52.4 to 51.5 and 51.7 to 51.3, respectively.

Kuehl likened service sector gains to retail, which increased at the end of the third quarter in 2020, slowed down in the fourth quarter, and is now making a comeback.

“We had a decent holiday season,” Kuehl said. “It wasn’t blockbuster, but there was considerably more consumer activity than originally thought. Most of it was online; the brick-and-mortar stores are still suffering a little bit. The other driver is construction, which has been strong.”

Kuehl predicts January’s positive CMI results are “an indication of things to come.”

For a complete breakdown of the manufacturing and service sector data and graphics, view the January 2021 report at CMI archives may also be viewed on NACM’s website at


NACM, headquartered in Columbia, Maryland, supports approximately 11,000 business credit and financial professionals worldwide with premier industry services, tools and information. NACM and its network of affiliated associations are the leading resource for credit and financial management information, education, products and services designed to improve the management of business credit and accounts receivable. NACM’s collective voice has influenced federal legislative policy results concerning commercial business and trade credit to our nation’s policy makers for more than 100 years and continues to play an active part in legislative issues pertaining to business credit and corporate bankruptcy. NACM's annual Credit Congress & Exposition conference is the largest gathering of credit professionals in the world.

Diana Mota
Andrew Michaels


Source: National Association of Credit Management


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