The Credit Managers' Index fell 2 percent to 53.4 in July, down from 54.5 in June, according to the National Association of Credit Management.
The index is created from a monthly survey of credit and collection professionals who rate favorable and unfavorable factors in monthly business cycles, with any number higher than 50 indicating growth.
The favorable index dropped to 58.9, the release said, noting it hasn't been below 60 since November. The unfavorable index dropped to 49.8, falling into contraction - or below 50 - for the first time since the end of 2010.
“This is a precipitous fall, and it is unlikely that a reversal will be swift,” NACM economist Chris Kuehl said in the release.
Kuehl pointed to the volatile service sector, where he said much of the month-to-month damage was recorded.
The service sector index dropped to 54, the lowest reading since November. Within the service sector, all unfavorable factors dropped, with only two remaining above 50. All unfavorable factors within the index were above 50 in April. During July, disputes, dollar amount beyond terms and bankruptcy filings registered large drops, according to the release.
Other July CMI notes:
- The sales index dropped to 58.5 after more than a year of being above 60.
- The manufacturing sector index dropped to 52.8 from 53.6. Within that index, sales fell to 57.2 from 59.1.
- The new credit applications index was 57.2, a slide from the January index of 61.9, when the NACM considered expectations high.