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Business Credit Shows Steady Growth

There are many ways to measure economic strength and weakness. One we look at quarterly is the level of credit applied for, accepted, rejected, and defaulted. We mainly use the National Association of Credit Managers monthly report.


The NACM report is a diffusion index where a number over 50 shows strength and number below 50 shows weakness. NACM measures credit in a number of ways:


Positive Factors: Negative Factors:

Sales Rejections of Credit Applications

New Credit Applications Accounts Placed for Collection

Dollar Collections Disputes

Amount of Credit Extended Dollar Amount Beyond Terms

Dollar Amount of Customer Deductions

Filings for Bankruptcies


As one can see, there are more negative factors tracked than positive factors. This is probably due to the credit managers aversion to risk and the need to view behavioral trends among credit takers prior to extending credit.


Below is a chart of the NACM Credit Managers' Index. It is a gauge that takes the positive and negative factors and then creates composite index number as a broad measure of credit strength.


In the full report, it was noted that there was little change in the negative factors but some movement in the positive factors with some increasing and some decreasing.


The key point from Chris Kuehl, NACM Economist, “...The data is still pretty firmly in the expansion zone(above 50)but not as robustly as was the case earlier.” While the ISM survey numbers for manufacturing in September showed the weakest manufacturing survey in 10 years, that has not been seen in the Credit Manager's Index.


Given the tariff fight, the BREXIT battle, and the slowing economies in Europe, 'firmly in the expansion zone' in our view shows the underlying strength in the US economy versus the rest of the world. We expect continued firm if unspectacular growth given the US employment levels, consumer spending and consumer credit levels.

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