The June economic report of NACM’s Credit Managers’ Index shows numbers still in the expansion zone but at their weakest level for the calendar year.

Amid returned deterioration in several industries, the June report of the Credit Managers’ Index (CMI) from the National Association of Credit Management (NACM) showed conditions dropping to their worst level since November.

The combined CMI reading for the manufacturing and services sectors slipped to 52.7, down from May’s 53.8. However, the favorable factors categories remained significantly closer to 60 than the contraction zone (anything below 50). Notably, the results don’t take into account the United Kingdom’s vote to leave the European Union.

“Since the statistics were collected prior to the ‘Brexit’ explosion, all eyes will be on the data coming in a month or so,” said NACM Economist Chris Kuehl, Ph.D. “The first place a crisis is likely to show up will be in the unfavorable factors, as companies that have exposure to the U.K. or Europe will possibly see more disputes, needs for collection action and bankruptcies,” said NACM Economist Chris Kuehl, Ph.D.

The unfavorable factors categories in June illustrated the greatest strain, as their aggregate reading slipped below last month’s 51 level and into contraction territory at 49.9. In all this month, four of the six unfavorable categories now sit in contraction territory. There was a small drop in the category of rejections of credit applications from 51.9 to 51.2. This reading likely indicates that companies are requesting less credit rather than a matter of creditors reducing what they are offering—if there was a developing trend of creditor reluctance, it likely would have started to show up here.

“The dark clouds on the manufacturing horizon include a decline in the sales of new cars and the potential drop in export demand as the dollar gains a lot more strength against the pound and the euro. How this will all play out remains to be seen,” said Kuehl. As for services, “there are still serious issues in the retail community, and the slow pace of consumer activity has not helped. There has been better news in the construction sector and in health care, but the consumer continues to vex the retailer and stunt growth.”

For a full breakdown of the manufacturing and service sector data and graphics, view the complete June 2016 report here. CMI archives may also be viewed on NACM’s website here.

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Website: www.nacm.org
Source: National Association of Credit Management