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The following are some comments from the monthly report of the National Association of Credit
Managers. They suggest there are some serious problems in the business sector.
The levels of these problems is worrisome according to the NACM. The above graph
shows the Credit Managers Index. A reading below 50 in the CMI indicates recession. (Click on the chart to enlarge it).
"These readings are as low as they have been since the recession started [in 2008]. The data from the CMI is not the only place where this distress is showing up.
The combined score is getting dangerously closer to the contraction zone and has not been this weak in many years (going back to 2010). It is sitting at 51.2 and that is down from the 53.2 noted last month.
For most of the last two years, these readings have been in the mid-50s and above—comfortable territory and generally trending up from one month to the next and now there is a very disturbing trend downward.
The most drastic fall took place with the unfavorable factors that indicate the real distress in the credit market. It has tumbled from 50.5 to 48.5 and that is firmly in the contraction zone—a place this index has not been since the days right after the recession formally ended.
The signal this sends is that many companies are not nearly as healthy as it has been assumed and that there is considerably less resilience in the business sector than assumed.
The real damage is showing up in the unfavorable categories. By far the most disturbing is the rejection of credit applications as this has fallen from an already weak 48.1 to 42.9. This is credit crunch territory—unseen since the very start of the recession. Suddenly companies are having a very hard time getting credit.
The accounts placed for collection reading slipped below 50 with a fall from 50.8 to 49.8 and that suggests that many companies are beyond slow pay and are faltering badly.
The disputes category improved very slightly from 48.8 to 49, but is still below 50. This indicates that more companies are in such distress they are not bothering to dispute; they are just trying to survive.
The dollar amount beyond terms slipped even deeper into contraction with a reading of 45.5 after a previous reading of 48.4.
The dollar amount of customer deductions slipped out of the 50s as it went from 51.8 to 48.7.
The only semi-bright spot was that filings for bankruptcies stayed almost the same—going from 55.0 to 55.1. This is the one and only category in the unfavorable list that did not fall into contraction territory and that suggests that there are big, big problems as far as the financial security of these companies are concerned."
Should we be concerned? Is a recession likely? What will happen to profits? And the stock market?
Stay tuned and thank you for visiting our blog.
"These readings are as low as they have been since the recession started [in 2008]. The data from the CMI is not the only place where this distress is showing up.
The combined score is getting dangerously closer to the contraction zone and has not been this weak in many years (going back to 2010). It is sitting at 51.2 and that is down from the 53.2 noted last month.
For most of the last two years, these readings have been in the mid-50s and above—comfortable territory and generally trending up from one month to the next and now there is a very disturbing trend downward.
The most drastic fall took place with the unfavorable factors that indicate the real distress in the credit market. It has tumbled from 50.5 to 48.5 and that is firmly in the contraction zone—a place this index has not been since the days right after the recession formally ended.
The signal this sends is that many companies are not nearly as healthy as it has been assumed and that there is considerably less resilience in the business sector than assumed.
The real damage is showing up in the unfavorable categories. By far the most disturbing is the rejection of credit applications as this has fallen from an already weak 48.1 to 42.9. This is credit crunch territory—unseen since the very start of the recession. Suddenly companies are having a very hard time getting credit.
The accounts placed for collection reading slipped below 50 with a fall from 50.8 to 49.8 and that suggests that many companies are beyond slow pay and are faltering badly.
The disputes category improved very slightly from 48.8 to 49, but is still below 50. This indicates that more companies are in such distress they are not bothering to dispute; they are just trying to survive.
The dollar amount beyond terms slipped even deeper into contraction with a reading of 45.5 after a previous reading of 48.4.
The dollar amount of customer deductions slipped out of the 50s as it went from 51.8 to 48.7.
The only semi-bright spot was that filings for bankruptcies stayed almost the same—going from 55.0 to 55.1. This is the one and only category in the unfavorable list that did not fall into contraction territory and that suggests that there are big, big problems as far as the financial security of these companies are concerned."
More details in The Peter Dag Portfolio on www.peterdag.com
George Dagnino, PhD
Editor, The Peter Dag Portfolio
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Author, Profiting in Bull and Bear Markets
No. 1 bond timer in the past 12 months.
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