The April ISM-New York Report on Business: Searching for the Bottom
The April ISM-New York Report on Business was released on May 4th at 9:45am Eastern and is available for download here. Please see the end of this commentary for additional information about the ISM-New York Report on Business.
In April, New York City purchasing managers continued to report the impact of the coronavirus pandemic on current and expected future business conditions.
Current Business Conditions fell 8.6 points to 4.3 in April, down from the previous month's record low of 12.9.
The Six-Month Outlook fell 11.5 points to 26.4 in April, down from 37.9 in March, officially becoming the lowest finding on record for this index. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, fell from 36.7 in March to 29.2 in April. While this is a 10+ year low (referencing the 26.3 reported in June of 2009), it is not the lowest finding on record.
Quantity of Purchases fell 24.4 points to 8.3 from the 10+ year low of 32.7 reported in March, reaching the lowest point on record.
Top line and forward revenue guidance both fell to new lows since they were added to the Report in February of 2012. Current Revenues fell 17.7 points to 10.9. Expected Revenues fell 15.6 points to 23.3.
Prices Paid was the index that moved the least for the second month in a row, edging down 1.8 from the breakeven point of 50.0 in March to 48.2 in April.
Another month, another series of drops. I had to ask our graphic designers to change the Y-axis in three of the charts to extend it down to zero: current business conditions, six-month outlook, and quantity of purchases. I’ll also admit to feeling dizzy after screening several dozen stock photos of spiral staircases to pick one for this post. Then again – it may have been the numbers that made me dizzy.
There are two additional comments I’d like to offer up this month:
About the NY-BCI
This is an index that I don’t often comment on. Officially, it is a “cumulative diffusion index constructed from the diffusion index of Current Business Conditions for businesses in the New York City metro area.” Don’t feel bad if that means nothing to you. It really just tracks the growth or contraction of the seasonally adjusted current business conditions month over month. The higher CBC is, the more the NY-BCI grows by. Because it is tied to time, I thought it would be interesting to look back and see just how much growth we’ve given up to the coronavirus. We’re back to where we were in September/October of 2018: so 18 months of growth down the drain. When businesses open back up (and they will open back up), it will be interesting to see how long it takes to get that lost growth back.
Current v. Future Expectations
This past week, the Wall Street Journal (subscription required) ran an interesting article citing The Conference Board’s index of consumer confidence and the University of Michigan survey of consumer sentiment. Both showed similar, historically unique trends. Typically, such indexes would show a peak in short term confidence and a drop in outlook in advance of a recession. Today, we see the complete opposite: a drop in current conditions with reasonably elevated outlook. While that doesn’t quite match what we see in the ISM-NY six-month outlook (a record low 24.6 in April), we’re looking at business expectations v. consumer expectations. Hopefully the fact that this downturn is self-imposed will allow us to recover from it more easily than from a true recession with multiple contributing macro forces.
Remember to check back in with me on Tuesday, June 2nd for the release of the May ISM-New York Report on Business. In the meantime, stay healthy and stay safe.
The 2020 Report Release Schedule is as follows:
About the ISM-New York Report on Business
Like ISM’s national report, the ISM-New York Report on Business is compiled as diffusion indices –we add the percent of positive responses to one-half of those responding that conditions remained the same. A reading of 50.0 means no change from the prior month, greater than 50.0 indicates a faster pace of activity, and less than 50.0 a slower rate. Each month is not so much a reading of the current level of activity as it is an indication of growth or contraction from the previous month.
A note specific to the New York Metro area, where all of this report’s respondants are located: they are predominantly in professional services industries. It is important to keep this in mind when we think about the context for the trends being reported by these particular purchasing managers.