The National Association of Credit Management's (NACM) Credit Managers' Index fell to 56.1 in June from 56.8 in May. NACM had expected the Index would show progress but a flat manufacturing sector and sharp decline in the service sector were enough to drag down the overall Index.

The reading had been approaching 60 (57.1 in November and 57.3 in January) and remain firmly in positive territory but it is no longer moving higher, according to NACM.

"The drop was unexpected, which has suddenly become a common refrain as some other data releases are starting to show similar trends," said NACM Economist Chris Kuehl. "It now appears that the economy contracted by far more than originally reported. Add to this the latest data on durable goods and there is something amiss. Consumer confidence numbers have recovered to levels not seen since the start of the recession, but that renewed level of enthusiasm has not been enough to pull the economy forward, or so it would seem."

Dollar collections dropped from 61.2 to 59.3 and the amount of credit extended also slipped, from 65 to 64.8, but stayed close to recent record highs. Accounts placed for collection shifted a little, from 53.8 to 52.5 - a sign that more creditors are falling too far behind to ignore, sparking more collection activity.

Rejections of credit applications dropped from 52.7 to 52, suggesting the existence of more desperate applicants. Disputes slipped under 50 again to 49.5 after being at 50.2 in May.

"New credit applications improved and that could be good or bad news. It is now over 60 for the first time since the recession, sitting at 61.5 after 58.9 last month. The problem is that there were more rejections of credit applications as well," Kuehl said. "When there are more applicants and more rejections, it is a signal that more companies in financial distress are seeking credit in the hopes that somebody will help them survive."

The damage to the overall Index was greater in the unfavorable categories, suggesting a certain amount of economic and financial distress, although the favorable factors saw some decline. The combined index of favorable factors deteriorated slightly from 62.7 to 62.4. The biggest drop occurred in sales, which went from a several years’ high of 65.6 to 63.9. That is still a reading higher than at any point since November 2013, but after a surge in May, it NACM hoped the trend would accelerate.

There also was a major dip in dollar amount beyond terms as it slipped below 50 for the first time since December. It stands at 49.6 after being at 51.5 last month. Dollar amount of customer deductions also slipped under 50 for the first time in more than two years to 49.4, a full point down from May. Filings for bankruptcies actually improved and is as robust as it has been in some time. The reading this month is 58.9 compared to 58.4 last month.

"It will be interesting to see if this reading gets worse in future months as these other categories are now trending badly," Kuehl said.

The Credit Managers' Index is created from a survey of U.S. credit and collections professionals. Participants are asked to rate whether factors in their monthly business cycle - such as sales, new credit applications, accounts placed for collections, dollar amount beyond terms - are higher than, lower than, or the same as the previous month.

The results reflect the entire cycle of commercial business transactions, providing an accurate, predictive benchmarking tool.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.