Sales up, margins down: December CMI shows expansion with warning signs

NACM’s seasonally adjusted combined Credit Managers’ Index (CMI) slid 2.2 points to 52.8.

“Respondents continue to report numbers that are consistent with an overall trend of expansion, though that strength may be waning as comments suggest that financial stress is growing,” said NACM Economist Amy Crews Cutts, Ph.D., CBE. “A theme in the comments this month is that, in order to prop up sales, margins have been trimmed. While this strategy works in the short term, eventually firms will have to raise prices.”

The Index for Unfavorable Factors declined 0.1 points to 51.0 points. The Index has not moved much above or below the 50-point line, which is the break between contraction and expansion.

• Half of the Unfavorable Factors deteriorated with the largest decline seen in the Dollar Amount Beyond Terms Factor, which lost 2.9 points, falling to 51.3.

Although the Favorable Factors Index fell 5.2 points to 55.6 points, it remains in expansion. All of its factors are in expansion in the mid-50s point range.

What respondents are saying:

• “While payments increased for us in November, it is clear that businesses are extending payment plans, seeking longer terms and trying to stretch their dollars as much as possible.”
• “We are seeing overall slower payment patterns from our accounts but have higher order volumes due to end-of-year promotions.”
• “We started filing many liens and bond claims to collect in October and are now getting funded and lifting liens. It is a challenging environment in which to ensure timely payment, with a lot of extra work going into normal credit management activity.”

Read the full report here.