CMI Numbers Continue To Slip, But There Are Silver Linings

03/31/2013 Posted by admin

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The Credit Managers’ Index for August has not been this low in more than a year-falling from July’s 53.9 to 52.7-and is now tracking at levels last seen in 2008-2009. “The news this month isn't good and comes as no shock to anyone who has been tracking the information coming from all directions,” said Chris Kuehl, PhD, economist for the Nation's Association of Credit Management (NACM). If there is any excellent news, it is that the mixed number hasn't yet fallen below fifty, the threshold separating contraction from enlargement. But the index of unfavorable factors fell to contractionary levels.

The incontrovertible fact that the information wasn't worse this month than it was is maybe worth pointing out as almost all of the other indices released in the last one or two weeks recommended there might have been an even steeper decline. . Here the information barely changed, going from 58.9 to 58.1. This is still much lower than almost all of the last year, but the precipitous collapse that happened in the companion part of the overall index didn't occur here.

There had been even some improvement in the quantity of dollar collections, while declines in the sales class were slight, from 60 to 59.2. “The most interesting aspect of the info is that extension of credit essentially improved in the middle of all this gloom and doom. The proven fact that expedient factors have improved barely or stayed stable provides some hope that conditions will improve in the coming months,” declared Kuehl. “There is still demand and business progress, but the emergency in the overall economy has been putting pressure on the finances of many companies.” . On examining the unfavorable factors, it is striking that the issue is essentially one of sudden business stress and failure.

The largest declines were in accounts placed for collection and dollar amounts beyond terms. These are signs of real trouble among customers, but it is similarly significant that filings for bankruptcies didn't increase dramatically and there was not an acceleration in the rejection of credit applications. The deflection in these contributors is very fascinating and informative. While hopeful, one could look at this data and conclude that corporations got in trouble in the last month or so as a result of a unexpected drop in business after expecting better times. Proof from earlier in the year showed that corporations across the board were forecasting better times in the second 1/2 the year and many were making an attempt to make preparations for this with expansion plans. This anticipated commercial expansion did not come to pass and these companies quickly got into trouble.

If there is a little silver lining to all this, it is that the level of bankruptcies has not risen at the same pace. That implies one of two things. If the economy does not catch fire to some extent in the near future, the bankruptcy rate will begin to climb and the index will reflect it. The other mildly encouraging piece is that the rate of rejection for credit applications was not clearly different from last month. There's still credit available to consumers that are fighting against the trend. The information this month is mixed but with a decidedly downward slope. The CMI remains in enlargement territory, but is hanging on to that standing by a thread.

There might be another month of basically flat growth in store, but after the economy will begin to lean in one direction or another. If there is no real improvement in some of the fundamentals, the index will reflect continued deterioration. There's some resilience clear in the index numbers as the favorable categories are holding their own. The sectors which will drag the whole index further under include those that are most conditional upon the decisions that companies made when they were expecting some solid economic expansion by this time. The credit requested made sense at the time, but now there is some heavy concern so far as what occurs next if the growth rate remains snared in the expected one percent to 1.5% region.

The net CMI report for Aug 2011 contains the full commentary, complete along with tables and graphs. CMI archives can also be viewed online . About the National Organisation of Credit Management . NACM, based in Columbia, Maryland, supports more than fifteen thousand business credit and financial pros worldwide with premier industry services, tools and info. NACM and its network of associated associations are the number 1 resource for credit and financial management information, education, goods and services built to improve the management of business credit and accounts receivable. NACM’s collective voice has influenced Fed. Legislative policy results concerning commercial business and trade credit to our country's policy makers for more than a hundred years, and continues to play an active part in legislative issues pertaining to business credit and company insolvency.

Its annual Credit Congress is the biggest gathering of credit professionals internationally. NACM has a plethora of member experts in the fields of business-to-business credit and law. Think about using NACM as a resource in the development of your next credit or finance story. Source : Nationwide Organisation of Credit Management . Contact : Caroline Zimmerman, 410-740-5560 . Site : our web site pr newswire


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