September CMI Edges Slightly Upward, Tone Worsens

The September NACM Credit Managers’ Index rose slightly from its two-year low from a reading of 55.0 to 55.6. While the small improvement is encouraging, many respondents have a more urgent tone when describing business conditions, said NACM Economist Amy Crews Cutts, Ph.D., CBE.

“The data and the commentary seem to be in opposition, but they are in alignment,” Cutts said. “For example, sales, which are measured in dollars, are rising in value due to higher prices, while the number of units sold is steady or falling for most of our respondents. Similarly, collections are up this month, but it is taking much more effort on the part of credit managers to get payments.”

The combined index of favorable factors improved 1.7 points (63.8); a level that is 1.0 points lower than a year ago. Three of the four categories in the favorable factors list increased, reversing their trends from the August survey. The dollar collections index led the rise with a sharp 5.6-point gain to 63.3—its best reading since May 2022. Sales improved for the first time in six months by 1.2 points (64.2). Amount of credit extended gained 1.0 points (66.3). The index for new credit applications deteriorated by 1.0 points to 61.4.

Remaining unchanged month over month at 50.2, the index of unfavorable factors is 1.7 points lower than a year ago. All but two of the unfavorable factor indexes declined. The index for dollar amount beyond terms improved 2.3 points (48.7); and rejections of credit applications gained 2.8 points (52.2). Filings for bankruptcies fell 4.1 points (53.5); disputes, 1.0 points (48.2); accounts placed for collections, 0.2 points (49.4); and dollar amount of customer deductions, 0.1 points (49.1).

“There is significant volatility in the CMI sector indexes at the moment, with the longer-term trend being toward a weaker economy in both sectors,” Cutts said. “Neither is suggesting that we are in or near recession at the moment. However, over the past month interest rates have shot up … Fed Chairman Powell indicated that we will be seeing increases in the Fed funds target rate for as long as it takes to bring inflation down to the target range,” Cutts said. “The tone of this statement was sobering and a bit surprising, as it was a direct indication that they, the FOMC, valued fighting inflation over avoiding a recession.”

What CMI respondents are saying:

• “From a manufacturing perspective we are running at full capacity. The only challenge we continue to have pertains to supply chain complications.”
• “The postal slowdown is starting to have a greater impact on our cash flow. I can see this starting to be reflected in our numbers.”
• “I’m seeing more instances of accounts which aren’t responding to collection efforts. Some that are responding have advised of financial distress—especially cash flow issues.”
• “With inflation driving prices higher and higher, I grow increasingly concerned that customers without sufficient cash flow will keep digging themselves into bigger and bigger holes.”
• “Orders are still relatively strong considering the new home construction trends and we expect sales and new orders to taper off in the next 3-4 months. Production is down primarily due to employee shortages and turnover.”
• “Our container deliveries were delayed so invoices are being paid late. Not credit issues, but shipment/logistics issues.”

Sign up to receive monthly CMI survey participation alerts. For a complete breakdown of manufacturing and service sector data and graphics, view the September 2022 report. CMI archives also may be viewed on NACM’s website.