The National Association of Credit Management’s Credit Managers’ Index (CMI) gained two points in March. Following four months of fluctuations, the March CMI reached its second-highest combined score in a year and was just a half a point shy of the highest, which was recorded in January.

“It is normally the task of the economist to find the dark cloud that surrounds the silver lining,” Chris Kuehl, Ph.D., an economist for the NACM, said. “But numbers this month look far better than anybody had expected and indicate credit professionals are finding their footing on a path back to normalcy.”

Three of the four combined favorable factors bounced back from a February dip, creating a combined score of 67.7. Dollar collections and sales were among the most improved. Amount of credit extended also experienced a slight gain, while new credit applications decreased.

More than half of the combined unfavorable categories also increased in March, most notably the dollar amount beyond terms and accounts placed for collection. Bankruptcy filings and credit application rejections also experienced gains. Disputes, however, dropped less than half a point, while dollar amount of customer deductions fell slightly more. Overall, combined unfavorables scored 53.8.

“The truly encouraging news is that unfavorable categories have had five consecutive months of readings 50 and above,” Kuehl said. “Not one of the readings has been in the contraction zone since October 2020. This bodes very well for future economic growth readings.”

Manufacturing Sector

The manufacturing sector experienced a small increase to 59.2 in March. Dollar collections and sales were the only favorable factors to increase. Amount of credit extended dropped just over a point, followed by a 4.5-point drop in new credit applications. In total, manufacturing favorables scored 67.1, while combined unfavorables scored 54.

Kuehl credited the unfavorables score in large part to increases in accounts placed for collection, dollar amount beyond terms and credit application rejections. Bankruptcy filings also improved. The only two unfavorables to decline were the dollar amount of customer deductions and disputes, both nearing contraction territory.

“The sectors that have performed well through most of the last several months have been in manufacturing,” Kuehl said. “This has been explained in part by the fact consumers have been unable to spend as they usually do on services.”

Service Sector

Prior to the COVID-19 pandemic lockdown, on average, about 65% of consumers’ disposable income was spent on services, according to Kuehl.

“The higher the income, the more spent on services as opposed to things,” Kuehl said.

With a three-point gain to 59.4, the service sector, however, did exceedingly well last month, which is likely attributed to the extensive gains in all four favorable factors, Kuehl noted.

Dollar collections experienced the most extensive increase, rising by nearly nine points, while sales achieved the highest reading for the sector. Amount of credit extended also increased as did new credit applications.

The CMI reflects retail and other services less affected by pandemic shutdowns more than some of the other service areas such as hospitality, entertainment or the restaurant trade, according to Kuehl.

Unfavorables reached their highest score since March 2020. Credit application rejections was the only unfavorable to decrease, and dollar amount of customer deductions held. However, dollar amount beyond terms increased by nearly six points, while accounts placed for collection jumped three points. Bankruptcy filings and disputes experienced minimal gains.