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End of Summer Brings CMI Out of Decline

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End of Summer Brings CMI Out of Decline

Credit professionals saw a turnaround in results in the August 2018 economic report from the National Association of Credit Management; however, NACM Economist Chris Kuehl, Ph.D., anticipates the calming state won't last long.

PR Newswire

COLUMBIA, Md., Aug. 31, 2018 /PRNewswire-PRWeb/ -- Two months of dwindling results casting a shadow on NACM's Credit Managers' Index (CMI) ended in August with a slow but steady climb in new credit applications and dollar collections in the manufacturing and service sectors. Although each sector experienced modest gains in their respective favorables and unfavorables, NACM Economist Chris Kuehl, Ph.D., said they are still far from recovery if there are hopes to return to its former glory seen a couple of months ago.

The May CMI achieved its highest year-over-year reading but had since fallen from the high to mid-50s in June and July, particularly in manufacturing, where sales were hit the hardest. A turnaround in August, albeit minimal, is taking the CMI down a new path after revealing a combined score of 55.8, up about three-tenths of a point from July. Improvements in overall favorables (64.3) is responsible for the course correction, Kuehl said, despite friction from unfavorables (50.1).

"At the moment, it feels good to have a month without a lot of drama," Kuehl said. "But, this state of calmness is not likely to last that much longer given the appearance of some inflation indicators and the potential impact of various trade deals, which have been on-again and off-again."

New credit applications and dollar collections bounced back with scores of 62.5 and 62.6, respectively; however, the amount of credit extended maintained the highest reading at 66.9, followed by sales at 65. Four out of six unfavorables worsened month-over-month, including bankruptcy filings, credit application rejections and disputes.

Manufacturing was more well-off compared to the service sector, the former recovering from its half-point dip in July for a score of 55.9. Sales, which plummeted to the low 60s the month prior, jumped just over four points (66.5) in August. Additional gains were recorded in the remaining favorables, most notably the amount of credit extended and new credit applications. Kuehl said the manufacturing score was held back by half of the spiraling unfavorables, including bankruptcy filings and disputes.

"The worry stems from the near constant threat of new tariffs and trade dispute," he noted. "The steel and aluminum tariffs are still biting hard. Then, there is the roller coaster strategy that has tariffs imposed on cars and other products one day and those restrictions lifted the next."

The service sector (55.7) wasn't as successful in August, continuing its decline from the prior month. Favorables only improved two-tenths of a point, while unfavorables dropped one-tenth of a point. Unlike manufacturing, service sales fell almost two points, in addition to a half-point decline in the amount of credit extended. Dollar collections were the only favorable to see a substantial gain of about two and a half points. Whereas bankruptcy filings improved slightly for the service sector, disputes, credit application rejections and accounts placed for collection suffered.

For a complete breakdown of the manufacturing and service sector data and graphics, view the August 2018 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.html.

ABOUT THE NATIONAL ASSOCIATION OF CREDIT MANAGEMENT
NACM, headquartered in Columbia, MD, supports approximately 13,000 business credit and financial professionals worldwide with premier industry services http://www.nacm.org/services.html, 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 http://creditcongress.nacm.org conference is the largest gathering of credit professionals in the world.

Contact:
Michael Miller
Andrew Michaels
Christie Citranglo
410-740-5560
http://www.nacm.org

Source: National Association of Credit Management

 

SOURCE National Association of Credit Management

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