The gains from the end of last year have carried forward according to the January Credit Managers’ Index (CMI), which rose from 54.4 to 54.8. This early activity is somewhat reminiscent of the enthusiasm that started 2011, but there are signs that this period of recovery might have more staying power than it did a year ago. The fear had been that all of these late gains would vanish as soon as the holiday impetus was gone, but the January CMI numbers suggest that this is not the case-at least thus far. The most-welcome gain was in sales. The reading in December was respectable at 60.5, but the new sales reading is at 63.5, the best performance since April 2011. It is more than a little encouraging that the January reading for this year is the same as it was in January 2011. Last year, that growth was followed by a very strong February at 66.3 and two more months with readings above 64, but the bottom dropped out in May and got progressively worse through the summer.

“The next few months will bear watching to see if this sales trend is repeated and sustained longer than it was in 2011,” said Chris Kuehl, PhD, National Association of Credit Management (NACM) economist.

There are indicators signaling future strength. New credit applications reached 61.9, which is significantly higher than it has been in well over a year. This category has not been above 60 since February 2011 and the best reading then was 60.3. “The jump from December was nothing short of spectacular as the previous reading was only 55.3,” said Kuehl. “The trend toward more credit applications suggests a lot of new activity; it is equally encouraging that there was a gain in the number of credit applications accepted.” The overall amount of credit extended slipped a little from December-going from 64.7 to 63.3-but the decline still left the reading in the 60s and there is some evidence that there have been more extensions of credit to more companies but for smaller amounts. This may reflect caution on both sides, said Kuehl. The companies that are seeking credit for expansion are not willing to put themselves at too much risk, and the companies extending credit are also feeling a little protective.

The only negative trend in the set of favorable factors is a big drop in dollar collections, which is down from 61.4 in December to 56.8 in January. “This would be more of a concern if the latest number was not so consistent with the numbers noted for the last six months,” said Kuehl. “Looking over the last half of 2011 it appears that the December gains were something of an anomaly and dollar collections may have settled back to a more ‘normal’ position.”

Overall, the category of favorable factors rose from 60.5 to 61.4, spurred primarily by the gains in sales and credit application activity. The index of unfavorable factors did not perform quite as well, but neither was there a precipitous decline. It was essentially static nudging from 50.4 to 50.3. This masked significant movement in some categories. The biggest change was in the number of credit applications rejected, which increased to 50.2 from 49.5 and reentered the world of expansion as opposed to contraction. There are still three categories that are below 50 and in contraction: accounts placed for collection, disputes and dollar amounts beyond terms. The good news is that in November five of the six categories were under 50 and in December there were four. The trend is headed in the right direction. “The overall sense is that some companies are still struggling with recovery and will continue to be in distress until there is some consistent growth,” said Kuehl.