Some economists and investors believe that credit is what fuels the economy. So, what does it tell you when the National Association of Credit Management (NACM) reports that its Credit Managers’ Index is trending upward with a modest increase in January?
Many economic readings have been soft or negative for December and January. Consumer confidence and sentiment were both far better than what the broader market volatility might lead you to believe. Still, real business numbers have been weaker in general.
The NACM showed that the Credit Managers’ Index had a combined reading of 53.5 in January, up from December’s 52.8 reading. This gain put the numbers back to what they were in October of last year and is a move in the right direction.
Favorable readings gained just over 1.5 points, and the unfavorable categories remained even at 50.3. The NACM said:
The data on the unfavorable categories are not as encouraging, but at least the big declines seem to have come to an end for now. Those under 50 are now at four and last month only three dipped into the contraction zone showing that there are still many companies in some economic distress.
In general, the CMI report [for manufacturing] is more upbeat than has been the case in the recent past. However, as regards a two-point drop in the rejections of credit applications. There are companies that are in trouble right now and seek someone to throw them a lifeline by offering credit when that would likely be a bad idea. Many of the companies are not offering that credit rescue these days and thus reject a lot of the applications that are coming in.
Like manufacturing, the service sector had a modest upward trend with the favorable factors breaking the 60 barrier.
FULL NACM REPORT FOR JANUARY 2016
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