Are there rays of hope coming from the Credit Managers’ Index (CMI)? It would certainly seem that way after looking at the September performance. It is also a good time to look at why the CMI has been such a good tool for assessing the economy from one month to the next. It all comes down to the nature of the credit manager’s world. For all intents and purposes, the credit manager lives in the future. They may be pleased that their customer had a good month, but what they are really interested in is whether that customer will have a good month when it is time to pay that invoice. Much of what the credit function focuses on remains in the realm of 30, 60, 90 and 120 days from now. When credit professionals answer the monthly survey questions for the index, they are forecasting in many respects and that is the prime reason that the CMI as a whole tends to predict future economic behavior.
Over the past eight years, the CMI has repeatedly projected the overall performance of the U.S. economy by at least a month. In the early part of 2008, the CMI started to show weakness and was in decline well before the economy as a whole tumbled. Likewise, there were signs of recovery in the CMI earlier in 2009 than other economic data showed. “This pattern makes the data for September all the more nteresting,” said Chris Kuehl, PhD, economist for the National Association of Credit Management (NACM). “For the past few months, there was a slow deterioration of key credit conditions and many were expecting to see more declines this month. Instead, the combined index returned to the levels set in July. Granted, the index had been higher than recent readings since October of last year, but moving from 52.7 to 53.8 is not insignificant and it brings the combined index back to levels seen in the spring months.”
Click here to read the whole Credit Managers' Index September 2011 Report.