The latest Credit Managers’ Index data from the NACM showed another blip down by -1.5 points to a still respectable 54.6 in July. It adds to an ongoing pattern of volatility in the data, with most months of this year “zig-zagging”. But the overall trend remains up, as can be seen in the first chart below. It’s also consistent with the trend seen in the ISM Purchasing Managers’ Indexes, with the better economic conditions supporting credit quality and loan demand.
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Speaking of loan demand, one issue has been the slowdown in loan growth. I previous looked at that issue and concluded based on the Fed loan survey that it would be a transitory issue. And the data in the CMI survey appear to confirm this, at leas to a point. This year we've seen a surge in the "New credit applications" and "Amount of credit extended" sub-indexes of the CMI. This would on the face of it appear to be consistent with improving demand for loans. Overall though, while it's important to note the chopping around of the index, including the latest zag down, the trend of the data is consistent with an improving economy, improving credit dynamics, and better growth and inflation.
While the headline index has been chopping around month-to-month this year, the overall trend is up and is consistent with the improvement in the ISM indexes.
New credit applications and credit extended subindexes are looking much better than last year even though the data looks to have peaked for now. It seems consistent with ongoing loan growth.
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Article by Callum Thomas, Top Down Charts
