NACM’s June Credit Managers’ Index Loses Some Ground

The National Association of Credit Management’s Credit Manager’s Index (CMI) for June continued to lose some ground, with a total combined score of 57.5, which was down 2.3 points compared with May’s CMI and 3.1 points lower than April’s CMI.

“This is a good time to remember that credit managers are focused primarily on the future, and they seem to be getting a little nervous,” Chris Kuehl, Ph.D., an economist for the NACM, said.

The combined index of favorable subcategories went down 1.9 points compared with May. The sales subcategory was hardest hit, with a 5.5-point drop. Amount of credit extended slipped 1.6 points month on month, and new credit applications fell 1.5 points. Dollar collections had a 1.1 increase and was the only category in June to experience a gain.

“The fall in sales is taking place at the same time that many have been touting all the increases in sales of capital goods and strong retail numbers,” Kuehl said. “As long as the numbers are in the 60s, there is no alarm to sound, but it is clearly not headed in the right direction.”

The combined index of unfavorable factors slipped to its lowest level since February 2021. With a combined drop of 2.5 points, some unfavorable categories experienced significant changes. Disputes fell close to the contraction zone, sliding 3.3 points, but dollar amount beyond terms was the only category to fall into the contraction zone.

“As usual, the more interesting data shows up in the subcategories,” Kuehl said. “A bit more desperation is showing up in some sectors, but the biggest change and by far the most worrying was dollar amount beyond terms, as it fell 7.6 points. This is an early sign of distress in companies and suggests that some businesses are starting to try to protect their cash flow at the expense of their creditors.”

Dips in rejections of credit applications, accounts placed for collection, dollar amount of customer deductions and filings for bankruptcies ranged from 0.8 points to one point.

“These are still very respectable readings and do not signal any real issues,” Kuehl said. “Unfavorable categories remain in decent shape, but they are no longer all in positive territory as they had been for the seven consecutive months prior.”