Credit Managers’ Index (CMI), Economy, eNews
2023 CMI Recap: Trends Reveal Warning Signs
The NACM Credit Managers’ Index (CMI) ended 2023 just 0.7 above where it started the year. In December, the Index gained 0.3 to a reading of 52.6. The CMI continues to show considerable weakness but remains above the contraction threshold. “It points to considerable decline in credit conditions that are leading indicators of economic activity,” said NACM Economist Amy Crews Cutts, Ph.D., CBE. “The Fed’s aggressive stance to fight inflation has hit businesses through increased borrowing costs. The CMI is showing these stresses with higher delinquencies on accounts receivables and increasing business bankruptcies.”
The NACM Credit Managers’ Index (CMI) ended 2023 just 0.7 above where it started the year. In December, the Index gained 0.3 to a reading of 52.6. The CMI continues to show considerable weakness but remains above the contraction threshold. “It points to considerable decline in credit conditions that are leading indicators of economic activity,” said NACM Economist Amy Crews Cutts, Ph.D., CBE. “The Fed’s aggressive stance to fight inflation has hit businesses through increased borrowing costs. The CMI is showing these stresses with higher delinquencies on accounts receivables and increasing business bankruptcies.”
The index of favorable factors fell 0.1 to 57.9, led by a 2.3-point drop in sales and a 0.4-point drop in dollar collections. The sales factor was the most volatile in 2023 and is down 8.1 points from a high of 62.0 in June.
The index of unfavorable factors improved by 0.5 but remains in contraction territory for the sixth consecutive month at 49.0. Accounts placed for collections gained 1.2 points to 45.8, its 19th month under the contraction threshold. “Collection referrals continue to rise,” Cutts said. “The index for accounts placed for collections has been below 50 for an astounding 19 months and we saw bankruptcies rise quickly this year—these two trends are clearly indicating a recession in business activity heading into 2024.”
You can hear more from Cutts in NACM’s latest episode of the Extra Credit podcast, December CMI Signals Continued Weakness in 2024.
What CMI respondents are saying:
- “Sales are essentially stagnant, but business is falling off. We continue to see more and more customers not paying per terms. Our overall delinquency remained the same only because one large delinquent account made a payment.”
- “Customers in distress seem to be having more difficulty catching up and good accounts are maintaining their status.”
- “Within the last three years, we have grown as a company with mergers and acquisitions. We also have had consolidation of some of our warehouses, causing many issues. This led to a small sales increase and many companywide deductions due to lack of training and the ability to find good help since COVID. We have put actions into place to help resolve all the issues we have been having. Now we are seeing an increase in sales and less errors being committed.”
- “Business has slowed way down in the telecom industry. Companies like T-Mobile and AT&T have not had as many projects or hired as many subcontractors as last year.”
- “We have implemented a new ERP system this past year, so I do believe a lot of our deductions are system billing error related.”
- “DIR [direct and indirect remuneration] fees and various claw backs are restricting cash flow of independent pharmacies. Borrowing costs are high.”
Sign up to receive monthly CMI survey participation alerts. For a complete breakdown of manufacturing and service sector data and graphics, view the December 2023 report. CMI archives also may be viewed on NACM’s website.
