October CMI: Economy in expansion, but hurricane impact masks deeper risks

In October, NACM’s Credit Managers’ Index (CMI) presented a mixed economic picture, with a 0.2-point drop to 52.9 month-over-month, but a 1.5-point gain year-over-year. This level suggests that while the economy remains in expansion, growth is tepid amid notable risks.

“The CMI continues to tell a story of overall health in the credit management space, but the respondents’ comments indicate they are feeling more deterioration than the numbers might indicate,” said NACM Economist Amy Crews Cutts, Ph.D., CBE.

The devastation from Hurricane Helene and Milton may create a temporary boost in economic indicators like the CMI as businesses in affected areas increase orders to replace damaged inventory. This influx can give the appearance of strong economic activity, but it masks underlying instability.

“The devastation wrought by the recent hurricanes is driving strong demand in the last quarter of the year as people affected by the storms replace items washed away or damaged by the floods,” Cutts said. “The fourth-quarter GDP and holiday sales numbers will look robust as a result, so some caution is warranted when comparing against last year’s numbers.”

The index of favorable factors grew 0.9 to 57.4. New credit applications saw the largest improvement with a 1.9-point jump to 57.5.

The index of unfavorable factors fell back into contraction with a 0.9-point drop to 49.9. Accounts placed for collection are at 47.0, their 26th month in contraction. This means the number of accounts placed for collections has increased every month for more than two years.

What CMI respondents are saying:

• “Customers are starting to slow pay a bit more than they have been and canceled orders are becoming the new norm. You can definitely feel the shift.”
• “Collections have been stronger than forecasted.”
• “Fewer big builder orders this month, but the number of new smaller customers is up.”
• “Since we have seen the trend with customers paying more slowly and going beyond terms, we are pushing to collect sooner, place credit holds earlier and enforce credit limits.”
• “Multiple weather-related issues this year negatively impacted sales. We also have seen some degree of customer reluctance or uncertainty negatively impacting sales.”
• “Hurricane Helene blasting through the Southeast at quarter-close played havoc with collections and billing at a critical time! Hoping to work through the issues during Q4.”
• “Most of our past-due customers have adopted the attitude of ‘I’ll pay when I get paid.’”
• “Hurricanes caused an influx of large orders and need for credit limit increases to accommodate.”
• “Although order size has increased a bit, overall sales fell off. This may be a timing issue in terms of shipments and billing. More small accounts have been turned over to collections. Higher dollar collections are a reflection of increased billing now being paid. We are watching for M&A activity (asset-only sales are a concern).”
• “We have seen a slight surge in unexpected closings and accounts having to be placed with outside sources for collection or legal action.”
• “We had a lot of COD work due to the hurricanes and that increased our sales volume due to working around the clock.”

The November CMI Survey opens on Monday, Nov. 11. Sign up now to receive a notification when the Survey is ready to be completed. You can view the full October CMI report here.