‘Collapse’ in business credit signal may mean economic weakness ahead

Business credit tightened this month, perhaps signaling economic weakness ahead, according to a survey of credit managers.

An index generated from the National Association of Credit Management surveys fell sharply to 54.9 from 56.7. The total still shows expanding credit but at a much slower pace than in August.

Kansas City area economist Chris Kuehl called the decline “a collapse” and “almost shocking.” He said it may foretell a drop in the next few purchasing managers index reports due out the first of each month from the Institute for Supply Management.

“If that assessment continues to be accurate, the economy as a whole may be in for a very rude awakening,” Kuehl said in the association’s report. “The one factor that may provide some hope is that August and September are often difficult to get an accurate read on, given the vagaries of the summer break and the return to school.”

The survey particularly showed worsening trends in credit disputes, bankruptcy filings and other key factors that suggest a weaker economic trend.

This story was originally published September 30, 2014 at 11:52 AM with the headline "‘Collapse’ in business credit signal may mean economic weakness ahead."