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USA Country Risk Climate: Not Very Encouraging News from the Credit Management Index

Country Risk 200The latest data from NACM’s Credit Managers Index trends more negatively that expected and preferred.  It is not exactly time to panic but it is not the progress hoped for.  Here are excerpts from the latest report:

The combined score for the CMI this month was down from the reading notched last month but the drop was not huge. In May the reading was 54.1 and that was the same number noted in February of this year.  After February the readings fell to 53.4 in March and that is exactly what happened in the last two months – 54.1 in May and 53.4 in June. This has become something of an annoying pattern but there is the silver lining that readings have been well above the 50 line for over three years and throughout the last year it has varied between a low of 53.4 and a high of 57.   The latest reading is 59.6 and that marks a small improvement from May when it reached only 58.8. For the most part these readings have been consistent – waffling between a low of 58.3 in March to a high of 63.8 in August of last year.

The most distressing aspect of this trend is that all the higher numbers were from a year or so ago. Of the four components of the favorable index there were two that gained ground and two that slipped. The “sales” reading went from 57.1 to 56.6 and that is lowest reading seen in well over a year.  This is not something that promises a solid future and may be the most concerning of the readings. The “new credit applications” was above 60 for the first time since August of last year – hitting 60.5 after reaching 58.5 in May. There was a slip in the “dollar collections” reading as it went from 57.5 to 56.8 but this remains on the high side of the 50s and there has not been any panic yet.  The “amount of credit extended” shifted up from 62.0 to 64.5 and that is the highest level since December 2014. There is obviously active credit activity as there have been more applications received and there has been more credit made available. It will be interesting to see if that activity finally boosts sales

The real damage seems to be showing up in the unfavorable category as the index slipped into the 40s for the first time in three years.  Not that there was very far to do as the May number was only 50.9. Over the last year the movement has been slight – from a high of 53.2 in October to the current reading. There has been consistent distress in several industry categories and it shows. The “rejections of credit applications” moved from 51.9 to 50.8 and this is getting dangerously close to contraction territory. The “accounts placed for collection” reading sank back into the 40s with a 47.8 after being at 51.1 in May. The “disputes” category improved just a bit as it went from 48.0 to 48.2 but that still leaves the category under 50. The “dollar amount beyond terms” sunk like a rock and went from 50.7 to 46.8. There is building evidence that companies are finding it harder and harder to make good on their debts. The “dollar amount of customer deductions” improved but remained in contraction territory – moving from 47.8 to 49.5. The “filings for bankruptcies” mark went from 56.0 to 52.2 and that is lowest point reached since 2013. The overall sense is that the long delayed recovery has been taking its toll as business is finding it harder and harder to struggle on.

Dr-Chris-KuehlTo see the entire report with graphs and charts and the data for the last year go to the NACM website at www.nacm.org and look for the CMI

Source:  Dr. Chris Kuehl, Armada Corporate Intelligence

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