After months of fluctuation, credit professionals saw positive readings for the second consecutive month in the May 2019 economic report from the National Association of Credit Management.

NACM’s Credit Managers’ Index (CMI) has given credit managers no sense of a trend over the past few months, leaving many to question what’s next. However, May’s readings have indicated that positive growth is occurring as readings improved for the second month in a row, showing gains in both the manufacturing and service sectors. Reaching its highest reading since November 2018, the CMI’s combined score climbed to 55.7 thanks to positive results in the favorable factors.

Over the past six months, combined favorable factors showed little movement, occasionally breaching a reading over 60, only to decrease the following month. But in May, favorable factors jumped 3.7 points to a reading of 63.8, with the largest gain seen in sales at 65.9. Both the amount of credit extended (65.4) and new credit applications (64.2) also increased by nearly five points, while dollar collections (59.8) improved by less than a point.

There was little in the way of contributions from each combined unfavorable factor in May. Two of the six unfavorable factors showed improvement: dollar amount beyond terms (3.7-point gain) and disputes (0.1-point gain). Accounts placed for collection fell to 47, further into contraction territory (scores below 50), joined by disputes (48.6) and dollar amount of customer deductions (49.3). Bankruptcies also declined in May, rounding out combined unfavorables at 50.2, a modest increase from the previous month.

“The readings from the CMI suggest that there may be less gloom ahead than might be indicated by the Purchasing Managers’ Index, as the favorable numbers all tracked strongly positive,” NACM Economist Chris Kuehl, Ph.D. said. “The two indices seem to agree on current conditions and indicate that many companies are struggling with some of the economic headwinds related to trade concerns and a slower spending consumer.”

The manufacturing sector improved in May with a reading of 55.4 as a result of the 4.2-point jump in the favorable factors. A number of credit managers increased their amount of credit extended (64.6) in addition to modest gains in sales (63.3) and new credit applications (63.9). Dollar collections (60.5) also increased by about two points. There was little change in the sector’s unfavorable factors (50.3), where only disputes (48.2) and dollar amount beyond terms (51.8) improved. Accounts placed for collection (49), disputes and dollar amount of customer deductions (48.4) remained in contraction territory.

For the second month in a row, the service sector’s readings (55.9) showed better results, albeit slightly less than the manufacturing sector. However, the service sector’s unfavorables increased more so than those in manufacturing, bordering contraction at 50.1.

“There are signs that some of this momentum will certainly carry forward through the bulk of the summer,” Kuehl said. “If there are warning signs ahead, they seem to be towards the latter part of the year.”

Headquartered in Columbia, MD, NACM supports more than 11,000 business credit and financial professionals worldwide with premier industry services, tools and information. NACM and its network of affiliated associations are the leading resource for credit and financial management information, education, products and services designed to improve the management of business credit and accounts receivable.