The composite reading for the Credit Managers’ Index (CMI) this month is exactly the same as it was in December—54.9. This is just slightly better than it was in January when the reading fell to 54.6. For all intents and purposes, the readings suggest that the economy has stalled. The interesting movements are in the individual factors where there is actually some better news overall. The favorable factor index is up to just below where it was in November, at 59. This is a slight improvement from the 58.7 registered in January, and shows that the gains occurred in important factors.
Sales jumped from 58.6 to 59.2, taking the reading back to last year’s levels. The strength of this indicator can’t be overlooked, as this signals substantial activity despite all the concerns registered over the “fiscal cliff,” the debt ceiling and the sequester. However, the impact has been hard to figure out. On the one hand, it is pretty obvious that the lower GDP number from the fourth quarter was directly related to fiscal cliff concerns within the business community, but the latest revisions show no dip into recession as first thought. The data coming from the Purchasing Managers’ Index shows similar variability, and other signs within the rest of the CMI’s favorable factors point to continued confusion and caution.
New credit applications fell off from 57.1 to 56.7, suggesting more caution is being expressed in the business community in the face of political uncertainty. Conversely, there was improvement in dollar collections, from 56.9 to 57.5, and in amount of credit extended, from 62.2 to 62.5.
The unfavorable factor index rose from 51.9 to 52.2, with all but one factor improving as well. This is a good sign, as the index approaches the better readings of the past year. In general, there was either significant progress or stability in the factors. Rejections of credit applications fell from 52.8 to 52.3, but it is still higher than the majority of the readings in the last year, except August when it reached 52.4. The trend seems to indicate that most of those seeking credit are qualified and most are getting the credit they apply for.
Accounts placed for collection improved from 50.4 to 51.8, signifying the manifestation of fewer debt issues as the economy continues to solidify. Disputes looks to be stable at 50.4 for two months in a row and dollar amount beyond terms barely changed, nudging up from 49.6 to 49.8. Dollar amount of customer deductions and filings for bankruptcies improved very slightly as well, with the former rising from 50.3 to 50.7, and the latter from 58.1 to 58.3. The overall impression is of a steady state, with a slight movement in a positive direction. What makes all of this interesting is that it is taking place against a backdrop of political drama that many believe will cause serious economic dislocation before all is said and done.
A couple of conclusions can be reached from the data. It is either a testament to the fact that business can ignore political gyrations and grow anyway, or it means that the economy would be growing that much faster if all the political histrionics were not a factor.