CMI

The bad news is the October Credit Managers’ Index (CMI) did not see September’s big gains. The good news is that there was no retreat from September’s numbers. The overall index hit 53.8 in September after tumbling to 52.7 in the previous month, but in October the index essentially held steady at 53.7. There was a slight reduction in the index of favorable factors, but the index of unfavorable factors came just a little bit closer to expansion territory. The majority of economic indicators has been reasonably positive over the past few weeks and seems to be pointing to better months to come and the CMI index did not dispel this assumption, although the slower pace of progress reminds those paying attention that this is unlikely to be a rapid recovery for any but a handful of sectors.

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NACM is urging all of its members to support a bill in Congress that would require corporations to file Chapter 11 cases in the judicial district where they have their principal place of business or principal assets. H.R. 2533—the Chapter 11 Bankruptcy Venue Reform Act—would strongly curb the practice of venue shopping, whereby debtors choose to file in a jurisdiction that’s sympathetic to their needs, much to the detriment of their smaller creditors, who often have trouble participating in a case filed far away from their headquarters. NACM has already officially offered its support to H.R. 2533, but now we’re calling on you, the members, to write a letter to your representatives, asking them to support this bill.

To participate, first find your representative’s contact information  (be sure to use your company’s address, rather than your personal address, when determining which congressperson to write to).

Download this letter template. (36). You can edit with your representative’s contact information, as well as any personal experience you might’ve had with venue shopping. Be sure to edit the letter before mailing, or emailing it, since these letters hit hardest when they’ve been written by actual constituents, rather than just a generic form letter.

The more letters sent, the more likely the bill is to pass! Act now, and strike a blow for the nation’s trade creditors. If you have any questions, please contact Jacob Barron, NACM staff writer and government affairs liaison at jakeb@nacm.org.

CMI

The Credit Managers’ Index (CMI) for August hasn’t been this low in more than a year—falling from July’s 53.9 to 52.7— and is now tracking at levels last seen in 2008–2009. “The news this month is not good and comes as no shock to anyone who has been tracking the data coming from all directions,” said Chris Kuehl, PhD, economist for the National Association of Credit Management (NACM). If there is any good news, it is that the combined number has not yet fallen below 50, the threshold separating contraction from expansion. But the index of unfavorable factors fell to contractionary levels. The last time the unfavorable index was this low was in the 2009 period when the recession had just started to show signs of easing. The fact that the data was not worse this month than it was is probably worth noting as most of the other indices released in the last few weeks suggested there might have been an even steeper decline.

Kuehl said the best news in this month’s data is found in the favorable index. Here the data barely changed, going from 58.9 to 58.1. This is still much lower than most of the last year, but the precipitous collapse that took place in the companion part of the overall index did not take place here. There was even some improvement in the amount of dollar collections, while declines in the sales category were slight, from 60 to 59.2. “The most interesting aspect of the data is that extension of credit actually improved in the middle of all this gloom and doom. The fact that favorable factors have improved slightly or remained stable provides some hope that conditions will improve in the coming months,” said Kuehl. “There is still demand and business progress, but the crisis in the overall economy has been putting pressure on the finances of many companies.

April 2011 is the month the U.S. economy started to confront dual threats and the credit community almost instantly reflected the transition. For the past two years the focus of the business community has been almost solely oriented toward recovery and finding strategies that would propel them toward that recovery. The threat of inflation was not a concern beyond the sense that at some point all the efforts to dig out of the downturn would come back to haunt the economy. That was before the price of oil started to accelerate at a rate not seen since the2008 debacle. Now the inflation threat has become a clear and present danger and one that is affecting the business and credit community.

CMI Graph

NACM’s Credit Management Index has proven to be an accurate predictor of the changes in the economy.

In the January issue of NACM’s Business Credit Magazine an article about the success of the CMI and the potential for regional versions was published. Download Business Credit Article (46)

CMA encourages you to participate in the monthly CMI survey so that we can create a regional version of the CMI for accurate benchmarking and economic predicting. To participate in the monthly CMI survey, click here.