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November CMI Falls to New Low as Downward Trend Continues

By Kendall Payton, editorial associate NACM

The November NACM Credit Managers’ Index fell once again, this time by 1.2 points to a reading of 52.0, its lowest since May 2020 and the lowest non-recession, non-pandemic value recorded. Overlooking the slight rise of 0.6 in September, the CMI has trended downward for the last eight months as respondents cite ongoing supply constraints and slow payments from customers, said NACM Economist Amy Crews Cutts, Ph.D., CBE.

“Technically the index is still on the expansionary side, so there is some room for optimism, citing the bump in October retail sales,” Cutts said. “But the rapid decline of the housing and financial markets, headwinds from the end of federal pandemic aid programs and now large tech industry layoffs suggest growing recession risk as we head into 2023. … credit managers are the first in line to see trends in manufacturing and services, and they have been indicating for several months now that conditions are weakening.”

The combined index of favorable factors deteriorated by 0.8 to 56.1, a level that is 8.2 points lower than a year ago. The index for new credit applications leads the declining factors with a 2.0-point drop to 57.0. The index for the amount of credit extended fell 1.5 points to 57.2 and the sales index lost 0.7 landing at 54.5. The index for dollar collections rose 1.0 point to 55.7.

With a 1.4-point drop, the combined index of unfavorable factors is now in contraction territory with a reading of 49.3. All categories within the index deteriorated. Disputes led the decline with a 2.1-point drop (48.3). The index for the dollar amount of customer deductions lost 1.9 points (49.4); filings for bankruptcies, 1.4 points (52.4); dollar amount beyond terms, 1.4 points (47.6); accounts placed for collections, 0.7 (46.9); and rejections of credit applications, 1.0 point (51.2).

“Credit is still available to businesses, but it is getting tougher to come by and it comes with higher costs,” Cutts said. “Bankruptcies are still low relative to pre-pandemic times, but they have started picking up according to the U.S. Courts statistics through the third quarter of this year. NACM member respondents are indicating credit deterioration with more accounts going beyond terms or being referred to collections. I believe the CMI is indicative of recession starting soon, if it hasn’t already, from a business point of view.”

What CMI respondents are saying:

  • “Supply chain shortages are a continuing problem and dramatically affect our sales sourced from Asia.”

  • “We’re still having supply chain issues that limit our production, while new orders have increased.”

  • “Sales are constrained by continuing supply chain disruptions and pricing.”

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