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National Association of Credit Management (NACM)’s economist, Dr. Chris Kuehl, indicated that this latest set of survey results reinforces some of the assessments that have been made about the future. “As sales increase and credit applications are granted, there is a sense that more business is optimistic about the coming year than not. It was revealed in a recent KPMG survey that business confidence is improving and the CMI provides a clue as to why. Access to credit remains a limiting factor for many businesses but there is evidence of the logjam loosening. In conversations with credit managers and through the comments sent along with the survey, there is a sense that there are growing opportunities for the best customers and a willingness to get engaged with those showing a plan and some progress.”
One of the more significant improvements in the CMI came from the manufacturing category. The jump in favorable factors from the 50 mark in September has been impressive-reaching 54.9 in November. The CMI and the Purchasing Managers’ Index (PMI) are almost at the same level and both have risen from the depths earlier this year. The big increase has been attributed to a major jump in sales (from 52 to 56.3) and a similar increase in new credit applications (from 52.9 to 56.8). The rise took place despite the fact that dollar collections were down and the amount of credit extended was flat. This would suggest that there is some advance activity underway-manufacturers anticipating the arrival of a better year in 2010.
There was a slight reduction in November’s progress compared to what took place in October, but this seems to have most to do with the fact that there were more disputes and exposure than expected. The sense within the sector is that everything is based on future demand as opposed to reacting to the current situation. By this time, the boost that came from the “Cash for Clunkers” program has dissipated and most of the manufacturing for the Christmas season has taken place. There is some anticipation of growth in sectors like construction and energy in the spring and that is motivating much of the sector.
Kuehl says, “Manufacturing remains fragile in the economy at the moment and much of the focus is now on next year. The sense is that some of the more moribund sectors will start to stage a mild recovery and manufacturers are trying to get in the proper position. The attempt to catch up on credit is one signal, but so is the expansion of credit application so that future demand needs might be met successfully. The most worrisome aspect of this latest expansion is that it is still not rooted The rise of the CMI is now starting to enter pretty solid territory. It would now take a pretty pronounced slump in economic activity to drive the index below the 50 growth barrier, but there are still months ahead when a dip might be expected. The first quarter of 2010 is expected to be the weakest of the year and there are still quite a few that think a second recession could evolve in the early part of the year. The numbers now are heading upward and at a unified and rapid clip.
This report, complete with tables and graphs, and the CMI archives may be viewed here.