June Credit Managers’ Index drops again

NACM’s Credit Managers’ Index (CMI) fell 0.5 to 53.9 in June. This change in the CMI indicates a continued slowdown in economic activity. “There is no discernible trend in the CMI except that it remains in a low orbit,” said NACM Economist Amy Crews Cutts, Ph.D., CBE.

• “The CMI oscillates between being on the precipice of recession to solidly in expansion and this month was a down month,” she continued. “This tracks with the major economic indicators pretty well.”

The index of favorable factors remains solidly in expansion even with a 1.7-point decline in June. All four favorable factors deteriorated in the June CMI.

The index of unfavorable factors moved back to the expansion side with a 0.4-point jump to 50.3. This index has only been in expansion territory twice in the past 12 months. Accounts placed for collection is at 46.2, its 25th month in contraction.

Disputes marked its 12th month in contraction territory with a 0.3-point drop to 49.3. Fraud could be to blame. “Somewhat worrying is that fraud is rising again, and fraudsters always seem to be one step ahead,” Cutts explained. “For example … fraudsters use the dispute system to deny payment on legitimate transactions after the product has been delivered.”

What CMI respondents are saying:

• “While we have new customers, current customers have slowed down their new construction or pushed delivery dates out.”
• “More accounts are past due resulting in an increase in accounts placed for collection. Some of it appears to be a delay in checks arriving to our facility.”
• “More smaller accounts are going to collections, and we are seeing some acquisition activity, but that impact is yet to be determined.”
• “Things are pretty much the same as a month ago, but they have slowly been picking up little by little. Lots of new things happening, so I am optimistic.”
• “Building supply sales to agricultural and light commercial are still strong. No slowdown in payments. Builders backlog in future projects are less than prior years so some slowdown might come.”
• “I’ve had a higher-than-normal number of NSF’s and requests to pay by credit card.”
• “I am seeing a lot more customers defaulting on the open balance. In addition, customers that we placed on hold/COD are trying to come back to get their accounts reopened, which would cause a higher risk rate for A/R. Many of these are being declined or requiring additional security.”
• “I’m seeing new customers looking for new suppliers as they have maxed out credit with existing vendors. They are being denied credit as I see they are already stretched.”

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