CMI: Recession-like conditions persist

NACM's February Credit Managers' Index (CMI) remains stubbornly close to contraction territory despite improving 1.3 points to 52.4. "We did not fall into formal recession in 2023 and we might not in 2024, but for many credit managers, it's as if a recession is well underway," said NACM Economist Amy Crews Cutts, Ph.D., CBE.

The index for favorable factors improved 2.6 points to 58.1.

• Leading the improvement was a 4.9-point jump in sales to 55.6 and a 4.4-point jump in new credit applications to 59.5.

The index for unfavorable factors improved 0.4 to 48.6 points. Unfavorable factors recorded its eighth consecutive month in contraction.

• Dollar amount beyond terms led the increase with a 7.0-point jump to 50.6, moving into expansion after seven months in contraction.
• Accounts placed for collection fell to a nearly 15-year low of 42.9, marking its 21st month in contraction territory.

"With the sudden leveling off of dollar amount owed that is beyond terms and the rising number of accounts being referred to collections, I think credit managers are tired of promises to pay and cries for extensions," Cutts explained. "Instead, they are moving more accounts to collections to stem losses. This to me is the strongest indication yet of the deep stresses affecting businesses."

What CMI respondents are saying:

• "I've noticed within the wholesale industry; trends have fallen flat over the past six months. There is very little movement in bad debt recovery of receivables."
• "There are still issues with slow paying customers and customers requesting or simply taking extended terms. We have more accounts with paydowns that have ceased their agreements forcing us to turn them over to a collection attorney."
• "We saw a decline in sales, mostly due to weather (slabs not able to be poured), but things seem to be improving now."
• "We are still working under a backlog of orders."
• "We see a dip in new accounts."
• "Customers are taking longer to pay their bills."

The bottom line: Despite a slight improvement in the February Credit Managers' Index, credit managers are experiencing conditions akin to a recession.

Sign up to receive monthly CMI survey participation alerts. For a complete breakdown of manufacturing and service sector data and graphics, view the February 2024 report. CMI archives also may be viewed on NACM's website.

-Annacaroline Caruso, CICP, editor in chief