The August Credit Managers’ Index (CMI) from the National Association of Credit Management reached a more than two-year high with a combined score of 56.5, which was just better than January 2020 and the highest reading since May 2018. This is also the fourth-straight month of gains; however, the CMI was in the cellar during the spring months due to COVID-19 and has been climbing back steadily.

“Given that the credit manager tends to think in the future, this is yet another signal that there may well be better times ahead,” Chris Kuehl, PhD, economist for the NACM, said.

All four favorable factors were back in the 60s in August, with sales leading the way at 65.8, a far cry from the 20 it posted in April. New credit applications and amount of credit extended also sat at 63.4 and 61.3, respectively. While still in the 60s at 61.2, dollar collections dropped more than a point in August. Overall, the favorables were at 62.9, the highest level since November 2018.

“The data is more than encouraging and seems to signal there is considerable confidence building as far as the end of the year,” Kuehl said.

Meanwhile, the combined unfavorables improved from 51.7 to 52.2, the same as it had been in February 2020. All but one factor — filings for bankruptcies — were in expansion territory, which is marked by a score of 50 and better. Bankruptcies reverted back to the June level of 47.7 after a slight bump in July.

“This is not unexpected given the surge of businesses that had been forced out by the lockdown and the very slow process of restarting,” Kuehl said.

Rejections of credit applications improved a point and a half to 51.5, while accounts placed for collection and disputes sat nearby at 51.6 and 51.8, respectively. Dollar amount beyond terms improved just shy of one point to 58.2. Dollar amount of customer deductions dipped slightly to 52.2.

The manufacturing sector experienced improvement in unfavorables, but it was the favorable factors that suppressed the index’s potential growth at 56. New credit applications dropped four points to 60.4 in August, while sales (67.2), dollar collections (61.3) and amount of credit extended (58.9) all improved slightly. Favorables altogether dipped modestly to 62. In unfavorables, rejections of credit applications (52.5), accounts placed for collection (50.9) and disputes (51.7) each improved into expansion territory. Dollar amount beyond terms jumped from 53.7 to 57.8, and dollar amount of customer deductions dropped a tenth of a point to 51.9. Filings for bankruptcies declined one and a half points to 47.9.

“For the most part, there has been far more progress in manufacturing, construction and even transportation,” Kuehl said. “The lockdown has not generally had the same impact on these sectors as has been the case with retail and the services in general.”

New credit applications led the way in the service sector, increasing nearly six points to 66.3 in August. Sales improved to 64.3 and amount of credit extended jumped to 63.6. Dollar collections slipped almost three points to 61. Favorables as a whole improved more than two points to 63.8.

“The general sense is that there has been a balance of some good news on the retail front and less promising activity in other parts of the service sector,” Kuehl said.

Unfavorables did not have as great a showing in August, declining half a point to 52.2. Rejections of credit applications (50.6) and accounts placed for collection (52.3) improved slightly, but disputes (51.8), dollar amount beyond terms (58.5) and dollar amount of customer deductions (52.5) declined but stayed in expansion territory. Filings for bankruptcies dropped to 47.6.

“There has certainly been a period of claw back in the last few months, and that has been more than welcome,” Kuehl said. “That trend had been expected to slow a little, but thus far, that has not been manifesting — at least as far as the credit managers are asserting.”