Despite the threat of a political impasse in the United States that some thought could derail the entire global economy, October’s Credit Managers’ Index (CMI), issued by the National Association of Credit Management (NACM), was largely unfazed, improving from 56.6 in September to 56.7 in October, its highest reading in more than a year and a half.
“The sense thus far is that all the political turmoil did not have an impact on the future plans for business,” says NACM Economist Chris Kuehl, Ph.D. There was a slight drop in July’s CMI readings, signaling some anxieties in the financial community about the then-looming threat of a government shutdown or default, but that was followed by successive increases in August, September and now October.
The most surprising data in the October CMI came in the favorable factors index, the combined reading of which increased to 61.5 from 60.9 in September. Sales slipped just slightly from 62.7 to 62.5, but managed to stay above 60, as it has since April. New credit applications rose from 57.4 to 58.5, signaling that more companies are seeking additional credit in order to grow their business. But according to Kuehl, “The better news is that amount of credit extended also increased from 62.9 to 63.8, suggesting that those asking for additional credit are good companies with solid credit ratings. These are the companies expecting improvements in the economy by next year.”
If the October CMI reflected any of the negative economic effects of the political brinksmanship in Washington, it did so in the unfavorable factors, Kuehl points out. The overall unfavorable index declined from September’s 53.8 to 53.6 in October, driven by rejections of credit applications, which slipped from 53 to 52.1, and accounts placed for collection, which fell from 54.3 to 53.3.
“More companies are having issues, which may be directly related to the government shutdown and related stress, given that 156,000 companies do work for the government,” he says. Still, disputes, dollar amount beyond terms and dollar amount of customer deductions all registered increases, and the unfavorable index itself has by and large remained stable and trending in the right direction.
To view the complete CMI report for October or archived reports, visit http://web.nacm.org/cmi/cmi.asp.