The NACM Credit Managers’ Index (CMI) saw a positive uptick in August, climbing out of the lower index from July. The combined score read 55.2 for the month of August, a reading safely in the expansion territory and up about two points from July’s 53.4.
NACM Economist Chris Kuehl, Ph.D, said the economy remains in a “transition phase,” with readings that resist a pattern, bobbing from lower readings to higher readings.
“The CMI was not the only indicator that experienced a reversal of fortune, but while that trend seemed to be on the upswing for some, there were those readings that showed further decline,” Kuehl, said. “In short, there is a little something for both the glass-half-full and the glass-half-empty crowds.”
With a reading at 55.2, August’s index reached a similar point in June where the index read 55, but not quite to May’s 55.7. While the readings for August’s CMI are not as robust as May’s, the combined score for favorables jumped up to the 60s, after July’s reading in the upper 50s. The combined score for unfavorables improved as well, still barely staying afloat at just under 51, but the score remains in expansion territory nonetheless.
Breaking down the details in the favorables, the combined sales category saw a major improvement, jumping forward six points from July to August and sitting at 64.4. While this was not the highest reading in 2019, a number comfortably in the 60s provides a sense of security.
The new credit applications number shifted up one-tenth of a point to 60.9, which is lower than previous months, meaning creditors are exercising more caution. Dollar collections also saw improvements, leaping from the mid-50s to an even 60. The amount of credit extended reached back into the 60s after dipping below last month. In regard to these details, Kuehl said July was “was something of an aberration, or simply a traditionally slower month.”
The unfavorables continue to have lower numbers than the favorables, with some categories slipping into contraction territory. Rejections of credit applications came in at just above 52, slightly down from July’s reading. The numbers still remain in expansion, which Kuehl said remains a positive outcome given a decline in new credit applications data.
Accounts placed for collection climbed up to the upper 40s, but remains in contraction. Disputes saw an even greater upset, slipping from expansion to contraction in August. The dollar amount beyond terms carried the unfavorables, jumping nearly eight points this month to 53.6. Customer deductions slipped but remain in expansion.
Bankruptcies displayed troubling data in August, coming in at 51.6, the lowest reading in more than three years. Kuehl said there have been companies “hanging on by a thread,” and some cannot handle the economic reversals observed throughout the last few years.
The manufacturing sector continues to be a point of concern in the economic outlook, and the numbers for August saw some decent readings, despite this apprehension. The combined score came in at 55.7, back to the levels in May after a dip in July. The favorables ascended well into expansion, from the mid-50s to just over 61 from July to August. The unfavorables also went into expansion, going up by about one point to just under 52.
“All in all, it showed a better set of indicators than some of the other manufacturing indices,” Kuehl said.
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