The Credit Managers' Index (CMI) is off to an overwhelming start to 2020. While other indices such as the purchasing managers' index are down to begin the new year, the CMI rebounded in January from a down December to reach a nearly three-year high. "Given that credit managers tend to think in the future, this month's good data may be seen as a harbinger of things to come," said NACM Economist Chris Kuehl, Ph.D. "Not that everything is likely to come up roses in the next several months, but for the time being the threats seem a little more distant than expected."
The combined CMI reached a reading of 56.4, up 1.8 points from December, and it is back at levels seen in mid-2019. Much of the gain is due to the large jump in the favorable factors; however, the unfavorables improved as well. The favorables increased almost three points to 62.2, the highest reading since May.
The unfavorables were all in expansion territory (score above 50) for the second month in a row. Dollar amount beyond terms made the biggest gain, standing at 54.2 after being at 51. "There has been a desire on the part of many companies to go into 2020 with a reduced set of credit obligations in order to be better protected should there be some kind of slowdown. This is showing up in the credit data with reduced slow pays and improved dollar collections," said Kuehl.
"Whether this was an indication of a strong finish to 2019 or a good start to 2020 the data is encouraging," Kuehl concluded. "Now, all eyes will be on next month to determine which month was the anomaly—the shrinking December or the booming January."
-Michael Miller, managing editor