The final quarter of 2016 saw a surge in economic confidence and a positive outlook on business growth, according to preliminary findings from the UK’s Credit Managers Index (CMI). Early indications from the Chartered Institute of Credit Management’s (CICM) quarterly barometer, show a 4.5-point increase in the headline result to 59.8. This represents the Index’s highest score since Q2 2015 and ends a worrying and successive three-quarter fall.
The Index also tests the status of the manufacturing sector (up 6.2 points to 61.2) and the services sector (up 3.6 points to 59.0). These show rising levels of optimism by credit professionals, those that deal directly with businesses’ finances.
Chief Executive of the CICM, Philip King, says the US’ CMI also rose in Q4 2016: “While confidence fell following the Brexit vote in the UK, confidence in the US is shown to be rising following the Trump election, according to its national Index. However, it will be interesting to see what effect the change in hands at the White House and a likely alternative economic policy will have on business confidence in the US, and how that, on top of Brexit negotiations, will effect the economy in the UK.”
The CMI is a diffusion index producing ‘scores’ of between one and 100 (typically in a range of 40 – 60). Ten equally weighted factors are included – three favourable and seven unfavourable – and the index is calculated on a simple average of the ten factors. The Index is reporting that all three favourable factors – credit sales, new credit applications and the order book – have increased, while just two of the unfavourable factors – rejected credit applications and insolvencies have fallen.