The monthly reports from the National Association of Credit Management (NACM) rarely get noticed at all by investors and economists, but this should be watched closer than it is currently. The NACM’s monthly Credit Manager’s Index continued to decline in September, falling to 52.9 from 54.2 in August.

While this report has never been 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. This is not really given consensus estimates by economists, but a reading above 50 is growth and one under 50 is contraction. What matters here is that September’s decline generated the lowest combined index of the past year.

The index of unfavorable factors was mostly to blame for the overall drop. While the index itself was above 50, four of the six categories fell below the 50.0 barometer. That means that two-thirds of the index components were in contraction rather than in growth.

As far as the breakdown itself is concerned, the index of favorable factors did not do too well, with three of the four categories dropping from the previous month. Still, those remained above contraction territory.

The category of new credit applications showed the only increase, from 57.7 to 58.1, but it was the third lowest reading within that category in the past 12 months.

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What stood out was that there was a decline in the favorable categories as well. The overall index fell from 59.2 to 57.7, for the worst performance in the past 12 months. Now there is the start of a more serious slump. The sales category was at 56.4, the lowest reading in the past 12 months. The dollar collections category reading of 56.4 hit another 12-month low.

The NACM believes that the combined events inside the credit market are signaling an abundance of caution ahead of what is supposed to be strong selling season. Growth triggers do not seem to be working out (low unemployment, no inflation and better housing), and the NACM is worried that nothing seems to be able to shake the lethargy and concern. The NACM’s combined quote said:

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. … Nearly all the readings are down from where they were a month ago and significantly down from a year ago. There will have to be a big rebound just to get back to where the readings were in October and November of 2014.

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