November’s economic report from the National Association of Credit Management saw notable improvements compared to the prior month, yet unfavorable factors may spell trouble for the remainder of 2018 and into the new year.
The manufacturing and service sectors in November’s Credit Managers’ Index (CMI) from the National Association of Credit Management hit a stride after a six-month rollercoaster ride. Compared to the prior month’s steep drop to the third-lowest decline since November 2017, favorable factors, notably dollar collections and sales, conveyed good news across both sectors; however, sights are set on “some consistent concerns” in the index’s unfavorables as 2018 comes to a close.
The NACM Combined CMI reading increased slightly to 55.8 in November 2018, about a point shy of the 56.6 reading this time last year. Combined favorables and unfavorables showed modest gains with readings at 63.2 and 50.9, respectively, the latter leaving contraction territory (anything below 50). Although holding the lowest reading among the favorables at 60.9, dollar collections was November’s most improved favorable with its 3.4-point climb. Sales weren’t too far behind (64.5), increasing by nearly two points, in addition to minimal gains in the amount of credit extended (65.3) and new credit applications (62.2).
While the combined unfavorables entered expansion territory by 1.2 points, only one—accounts placed for collections (48.2)—actually improved month-over-month (MoM). Dollar amount beyond terms were hit the hardest, rising 4.6 points to a 52.3 reading, and, like disputes (50.1), scored the highest reading since November 2017.
On its own, the service sector displayed significant improvements over the past month, increasing 1.4 points to 56, compared to 1.2-point gain in the manufacturing CMI reading (55.6). Dollar collections (60.1) and sales (64.9) kept the overall favorable factors score (63.2) strong, despite the divide seen in the sector’s unfavorables. Half of the service sector’s unfavorables turned around MoM, including credit application rejections (49.7), accounts placed for collection (47.2) and dollar amount of customer deductions (50.7). Unfortunately, dollar amount beyond terms (54.3) hurt the sector, increasing by eight points, as well as a rise in bankruptcy filings (54.9) and disputes (50.6).
“The manufacturing sector continues to expect the other shoe to drop at any moment, but so far, the impact has been delayed,” Kuehl continued.
All of the manufacturing sector’s favorables improved, especially dollar collections (61.6) and sales (64.2), followed by the amount of credit extended (65.4) and new credit applications (61.7). Once again, however, unfavorables (50.5) stunted any further growth in manufacturing, as all six factors worsened. Bankruptcy filings (52.2) increased the most by 1.3 points, with credit application rejections (53.1) and dollar amount beyond terms (50.3) not too far behind.
“It was not a big bounce back, but the good news is that the data certainly didn’t get any worse,” he said. “This is not an unusual pattern this year. It seems that a dip one month is followed by a recovery the next and, thus far, there have been few longer lasting trends.”
For a complete breakdown of the manufacturing and service sector data and graphics, view the November 2018 report.
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