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US Economy Under Significant Pressure, CMI Shows

NACM’s Credit Managers’ Index slipped 1.6 points in May to 52.2, nearly erasing three months of improvement. This indicates the economy could collapse under the mounting pressure of lingering debt ceiling issues, interest rate hikes and continued stress in the banking sector, said NACM Economist Amy Crews Cutts, Ph.D., CBE.
 |  Annacaroline Caruso, CICP, director of communications  |  , ,

NACM’s Credit Managers’ Index slipped 1.6 points in May to 52.2, nearly erasing three months of improvement. This indicates the economy could collapse under the mounting pressure of lingering debt ceiling issues, interest rate hikes and continued stress in the banking sector, said NACM Economist Amy Crews Cutts, Ph.D., CBE.

“The CMI is indicating that a recession starting in 2023 is a strong possibility once again,” Cutts said. “The May CMI survey reversed most of the improvement made since January, and while not exactly disastrous news, there is a clear signal that business conditions are weakening.”

Combined favorable factors fell 3.4 points to 56.3, led by a 5.4-point deterioration in the sales factor index to 53.9 points and a 4.7-point deterioration in the dollar collections index to 57.1. The amount of credit extended factor index lost 2.7 points to 56.2.

Combined unfavorable factors fell 0.3 to 49.5. All but two of the unfavorable factor indexes deteriorated in the May survey; the index for dollar amount of customer deductions improved by 3.4 points to 53.0 and the index for rejections of credit applications improved to 48.7. The index for the dollar amount beyond terms slid 2.4 points to 51.7 and filings for bankruptcies sank 2.1 points into contraction territory.

*The CMI is centered on a value of 50, with values greater indicating expansion and values lower indicating economic contraction.

What CMI respondents are saying:

  • “We still have a large backorder log.”
  • “Inflation and passed-on price increases of materials are the main reasons for higher sales numbers. Yardage is not up.”
  • “We are starting to feel real tension in the lower third of our portfolio.”
  • “Our stock sales are flat as we see some price deflation from a year ago, especially with disposable products. We are focusing on collections and reducing terms which we allowed leniency with during COVID to the restaurant industry. Low interest rates made this possible and higher interest rates for our ABL are tightening terms extended.”
  • “We have seen an increase in the number of customers who are requesting greater terms.”

Sign up to receive monthly CMI survey participation alerts. For a complete breakdown of manufacturing and service sector data and graphics, view the May 2023 report. CMI archives also may be viewed on NACM’s website.

Join NACM Economist Amy Crews Cutts at Credit Congress on Monday afternoon, June 12, for a discussion of the economy and what’s next.

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Annacaroline Caruso, CICP, director of communications

Annacaroline graduated from Boston University in 2019 with a degree in Journalism. Her career has taken her from Dublin, Ireland to South Bend, Indiana before returning home to Baltimore, Maryland. She joined the NACM family in 2021 and helped launch the Extra Credit podcast. Annacaroline is passionate about creating content for B2B credit managers and using her storytelling skills to raise awareness about the profession. She invites story ideas at annacarolinec@nacm.org.