Credit professionals saw a turnaround in the February 2019 economic report from the National Association of Credit Management, as the manufacturing and service sectors experienced gains after a two-month decline.

NACM’s Credit Managers’ Index (CMI) made a significant gain in February when the manufacturing and service sectors saw the largest upswing following two months of decline. After ending 2018 on a low note and falling further in the new year, the combined CMI reached 54.9 in February in part by vast improvements in each sector’s unfavorable factors, such as dollar amount beyond terms and dollar amount of customer deductions.

The CMI’s recurring decline began in October 2018 with a two-point drop, only to bounce back in November but fall once more in December and January. While combined favorable factors maintained readings in the high 50s and low 60s for an overall score of 60.7 in February, combined unfavorables reached its highest year-over-year reading at 51 — all six of which improved. In favorables, new credit applications (58.9 after a 0.7-point bump) and dollar collections (59.1 after a 0.1-point bump) saw minimal gains, with sales (62.6) and the amount of credit extended (62.3) landing positive readings.

Although the manufacturing sector saw a larger jump for an overall score of 54.8, the service sector achieved a slightly higher reading at 55. Manufacturing’s new credit applications flourished in February by more than five points (58.6), and sales and dollar collections managed to reach the low 60s.

Meanwhile, the amount of credit extended dipped to 59.2, the lowest score YOY, bringing the overall manufacturing favorables score to an even 60. Bankruptcy filings was the only unfavorable factor to fall, as the remaining five factors increased, including dollar amount beyond terms and dollar amount of customer deductions. Manufacturing unfavorables climbed out of contraction territory, landing at 51.4.

“The threatened tariffs and the impending trade war have pushed a lot of advanced buying and stockpiling on the assumption everything from commodities to intermediate parts and finished goods will be unavailable,” said NACM Economist Chris Kuehl, Ph.D. “Inventory levels are as high as they have been in some time. If the trade deal worked out in some fashion, it may be very hard to reduce the size of that inventory overhang.”

At an overall reading of 55, the service sector recovered in February, most notably because of unfavorables. Favorables such as dollar collections and new credit applications declined; however, the overall favorable factors increased 0.2 points to 61.5. Once again, all six unfavorable factors brought its overall score to 50.6—dollar amount beyond terms and bankruptcy filings reaped the most benefits.

Headquartered in Columbia, MD, NACM supports more than 11,000 business credit and financial professionals worldwide with premier industry services, tools and information.