Credit index falls in December

The Credit Managers' Index fell a point and a half to 55.6 in December, after registering at 57.1 in November, according to data published by 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.

Calling the month-to-month decrease "dramatic," the NACM said the drop erased most of the gains made in the past few months, bringing the CMI back to mid-summer levels, according to a news release.

Delivering the hardest blows were a two-point decrease to 57.5 in the service sector, reflecting a slow response to Christmas; a 1-point decrease to 55.7 in the manufacturing index; and a declining housing sector.

The overall favorable factor index drops to 59.3 from 61.3, driven by a reduction in sales to 58.7 from 63.4, the fifth lowest reading in the last year. A silver lining, according to officials, is that the smallest drop occurred in the amount of credit extended, which moved to 62.6 from 63.2 in November, the release said.

“This suggests there might be an opportunity to recover in the coming months,” said Chris Kuehl, an NACM economist, in the release. “It gives some faint hope that many companies are still interested in making credit available to the customers they trust.”

The unfavorable factor index also fell to 53.1 in December from 54.3 in November. The only improving factor was rejections of credit applications - to 54.5 from 53.3 - which the NACM said supports the idea that credit is still available for companies in good standing.

“The sense is that most of the financial issues are of relatively recent origin and that would suggest that things could turn in either direction,” Kuehl said in the release. “The situation could get more serious and some of the longer-term issues could emerge, or this might be more of a curve in the road and just a delay in the response of the overall credit world and the economy.”