NACM’s April Credit Managers’ Index Reflects Economic Gains

The National Association of Credit Management’s Credit Managers’ Index for April 2021 reached a high not seen for more than 15 years. The monthly combined index for manufacturing and service sectors broke through the 60 mark with a reading of 60.6 after hovering in the high 50s for several months. The last time the combined score surpassed 60 was March 2006 (60.2). However, April 2004 (62.2) still holds the record for the CMI’s highest combined score. 

“The readings have been on a fairly steady climb since the early days of the pandemic last March and April,” Chris Kuehl, Ph.D., an economist for the National Association of Credit Management, said. “Movement in sub-categories have been equally impressive. There doesn’t seem to be a problem with getting paid in many sectors these days. Not only are companies paying what they owe, they are doing it on time. This marks the sixth-straight month without readings falling into the 40s. That is nearly unprecedented as far as the CMI history is concerned.”

At 68.2, the Index of Favorable Factors fell short of the 69.7 high noted in January. The index has held above 60 since June 2020, when it totaled 55.3 as it left three consecutive months of contraction. Month on month, three of the four subcategories registered gains. Sales (74.7) and amount of credit extended (69.0) fell just short of the highs noted in January (75.9 and 69.2, respectively), while new credit applications (65.9) bested February’s score (65.5) but still lags behind January’s (67.8). Dollar collections was the only subcategory to dip slightly (64.5 to 63.1).

“For the most part, the past 12 months have been very positive for favorable categories,” Kuehl said. 

The Index of Unfavorable Factors reached 55.6, marking its highest reading since July 2004 (56.7), and each of the index’s six subcategories also gained month on month. Rejections of credit applications (52 to 53) hit its highest level since March 2018 (53.3). Accounts placed for collection (59.6) set a new high since the CMI’s inception, while dollar amount beyond terms (57 to 59.4) and dollar amount of customer deductions (52 to 53) experienced solid gains. Disputes (51.3) edged up 0.7 points, while filings for bankruptcies (57.1) went up 1.4 points.

“These are all impressive numbers and reflect the overall gains in the economy noted thus far this year,” Kuehl said. “Today’s economic growth has been about as unexpected as last year’s collapse. Just last year, these readings tallied in the 30s and 40s.”