The Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) saw little change in the readings for March as it slipped a fraction from 55.6 to 55.5. The stall at February and December levels leaves January’s spike as the anomaly in recent months. The index’s readings, which had fluctuated since October, provided cautious expectations of consistent future growth. It was hoped that the February reading was the outlier, rather than a grim thesis for the rest of 2014, but a holding pattern due in part to the effects of a harsh winter is preferred to a decline, leaving room for some optimism about the economy in months to come.
Most of the factors comprising the March CMI stayed the same from the previous month, with a few notable exceptions. The sub-index of favorable factors slipped very slightly from 59.4 to 59. Within this index, sales moved from 59.4 to 59.1, staying on the low side of the last year. In the previous 12 months, the sales reading was above 60 for eight months, but fell into the high 50s for the last two. New credit applications slid from 58.1 to 57.3. Dollar collections dipped from 58.8 to 56.4, posting the most dramatic change in the favorable factors. The only positive shift was in amount of credit extended from 61.4 to 63.1.
“The rise in amount of credit extended is better news than it might seem as it suggests some anticipation for better days ahead,” said NACM Economist Chris Kuehl. “That credit was being extended despite the drop in applications for credit is a good sign in general.”
The unfavorable factor index showed the same kind of behavior, with an almost imperceptible rise from 53.1 to 53.2. There is no evidence of severe financial turmoil showing up thus far. Rejections of credit applications moved from 52.3 to 52.4 and trending in a positive direction, which is a good thing when coupled with the data on amount of credit extended. Filings for bankruptcies moved by the same amount, but in the opposite direction, from 58.5 to 58.4. The rest of the factors posted greater changes. Accounts placed for collection declined again, from 54.6 to 54.1, as did disputes, which fell the most from 51.9 to 50.9. Dollar amount beyond terms marked one of the few positive trends, improving from 51.1 to 52.4, but was bested by the increase in dollar amount of customer deductions from 50.4 to 51.2.
“At least the roller coaster seems to have ended for the moment,” Kuehl said. “What accounts for this month of almost no movement? There have been many theories put forward thus far and one that cited as the reason for the stall in the overall economy is the impact of an unusually long and bitter winter.” The CMI isn’t far from readings registered in other segments of the economy. The latest durable goods numbers, industrial production numbers and other measures have been flat as well. Ample evidence suggests that weather caused a great deal of disruption in almost every category. The transportation system was paralyzed several times, affecting everything from manufacturing to retail. The most recent Federal Reserve Beige Book readings reported that weather had caused a slowdown in the economic growth in nine of the 12 districts. Some GDP numbers have been anemic, but about what was expected.
“Nothing seems to be pointing to a steep or extended decline, but it is not very encouraging for the CMI to flatten out in a fairly unimpressive position,” Kuehl said. “There is nothing to set off alarm bells, which was not the case in February when there was a significant decline from the readings the month before. The sense for March is that almost everything is on hold and waiting for the return of predictable weather. The readings indicate a business community that is still somewhat encouraged about what might be happening in the economy later in the year, but there is a bias toward caution for the moment.”
