The U.S. economy seems to have hit the pause button again, according to the latest report by the National Association of Credit Management.
NACM’s monthly Credit Managers’ Index continued to decline in September, falling to 52.9 from 54.2 in August. A reading above 50 is growth and one under 50 is contraction.
As recently as July, all of the categories were in the 60s and it seemed to signal the rest of the year would be positive, according to NACM Economist Chris Kuehl.
“Now we have a month when almost all the categories have weakened. … [This] is signaling an abundance of caution going into what is supposed to be strong selling season and this is worrying,” Kuehl wrote in the report.
“It would seem that many of the triggers that usually promote growth are not working out — unemployment is relatively low, there is no inflation in the energy sector, and there has been improvement in the housing data — nothing seems to be able to shake the lethargy and concern.”
A 24/7 Wall St. article said that, while NACM’s monthly report typically is not “a significant driver of gains or losses for the broad market, economists and investors should watch out here in that this report is not one that signals any massive snap-back to economic expansion.”
The drop in four of NACM’s six categories below the 50 contraction zone was mainly due to the group’s index of unfavorable factors. The unfavorable factors include credit application rejections, accounts placed for collection, and disputes.
“When the unfavorable factors are showing stress, it is an indication that companies are feeling the pinch and may be starting a long downward trend,” Kuehl wrote.
Within NACM’s index of favorable factors three of the four categories dropped from the previous month, while all remained above 50. The category of new credit applications showed the only increase, from 57.7 to 58.1.
“Nearly all the readings are down from where they were a month ago and significantly down from a year ago,” Kuehl wrote. “There will have to be a big rebound just to get back to where the readings were in October and November of 2014.”