For the third consecutive year, the Credit Managers Index is experiencing a spring slump, 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.
Though May’s number – 54.6 – remains higher than 50, it slipped from the previous month and now sits at a level last seen in January and roughly unchanged from a year ago, according to an NACM news release.
“The gains made in the last year have largely been erased, and now the question is whether there will be a swift and significant comeback,” NACM economist Chris Kuehl said in the release. “The drop from 55.1 in April to 54.6 in May is not quite as steep as the one from 56.2 in March to 55.1 in April, but the decline is worrisome nonetheless.”
In 2010, the spring swoon was attributed to a premature recovery that made the first quarter look artificially strong, and in 2011, the culprits were supply chain disruption from the Japan earthquake and oil prices, the release said. Opinions on what caused the slump this year: the European crisis and its effect on imports; the idea that industry is taking a breather though the economic recovery is fine; and consumers hibernating as they react to factors such as high jobless numbers and inflation.
While the survey lends some support to all three scenarios, the data substantiates the sense that consumers are in retreat, which, according to NACM, isn’t necessarily bad news. Consumers can come back under the right conditions, the release said.
The May index did contain some positive signs, as sales data improved to 61.2 from 60, and new credit applications rose to 59.9 from 58.2.
Still, the data indicates more turmoil in the index of unfavorable factors compared to April. At 50.9, the unfavorable factor index is less than a point from sliding into contraction, which has been avoided since October. NACM attributes the decline to a drop in the amount of credit being extended – to 61.3 from 64.6 – and more credit requests being denied.
“The sense of the index for this month is that nothing has developed to perk the economy up, but neither is there evidence of an imminent crash,” Kuehl said in the release. “The gains made in the first few months have proven to be more ephemeral than expected, and many have concluded that 2012 will not break the ‘spring swoon’ pattern.
"The next challenge is to determine if this will be a long and difficult summer as in both 2011 and 2010," he added. "Nobody seems quite ready to make that declaration.”[[In-content Ad]]
