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The August ISM-New York Report on Business: Nowhere to go but down... except up
The August ISM-New York Report on Business was released on September 5th at 9:45am Eastern and is available for download here.
Like the other ISM reports, 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.
In August, New York City purchasing managers reported significant highs in Current Business Conditions and Current and Expected Revenues.
Current Business Conditions were at 76.5, a new 12 year high over the 75.0 seen in July, but still failing to surpass the 77.1 reported in November of 2006.
The Six-Month Outlook rose to an 8 month high, coming in at 79.9 in August, up from 77.8 in July. The Outlook has been 76.0 or above for half of the months in 2018 and has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, was the only index to decrease in August, falling slightly to 62.0 from 62.2 in July. Quantity of Purchases rose for the second month in a row, up 6.7 to 66.7 in August. This is the highest level reported since January of 2015, when Quantity was at 69.0.
Top line and forward revenue guidance reached new all-time highs (both were added to the report in February 2012). Current Revenues rose 23.3 to 83.3 in August. This is the first time Current Revenues reached 80, and it has only been in the 70s three times: August 2014 (71.4), October 2014 (71.9), and June 2015 (71.4). This is also the largest month over month increase ever recorded for this index. Expected Revenues rose to an all-time high of 87.5, up from 86.7 in July. This month's Expected Revenues refer to February 2019.
Prices Paid rose to 78.6 in August, up from 70.0 in July, reaching the highest level since 80.0 in September 2007.
It’s funny, because last month I commented that, “The findings in this month’s survey are nothing short remarkable. Not only do we have a number of milestone index levels, they are high across the board.” If I really wanted to slack off, I could have just phoned in this month’s commentary by re-running last month’s. But why? Discussing each month’s findings is way too much fun.
Business conditions in the New York Metro area are “up” – and they aren’t the only economic indicator to be surging. A number of national indicators are hitting highs (or lows as appropriate) as well.
- “U.S. stocks are back at all-time highs after a dizzying August rally…” (WSJ, 9/4/2018 – Subscription Required).
- The August jobs report will come out on September 7th and “is expected to show the U.S. economy created 190,000 new jobs with the unemployment falling to 3.8%, which would match a post-crisis low.” (Yahoo Finance, 9/2/2018)
- “It has been a bumper earnings season for America Inc. Second-quarter earnings per share for S&P 500 companies are expected to be 25% higher than a year ago, boosted largely by a big corporate-tax cut.” (The Economist, 8/30/2018 – Subscription required)
- Even the much-feared global trade way has turned out to be a bit of a bust, at least in advance of the ink being dry on the agreement formerly known as NAFTA.
But just as the ISM-New York Report is based on purchasing managers’ perceptions of activity, the decisions companies make in response to all of this booming economic news is based on their perception of the opportunities versus the risks. As I titled this month’s report – “nowhere to go but down… except up” – at some point, the report won’t be able to go any higher. Or, even more likely, not all of the indicators will go up and we’ll either see across the board reductions or a mixed bag.
Corporate teams (and investors) will be looking for any signs that a slide is beginning. In a way, the more optimistic the report, the jumpier decision makers will be. Once again, our role is to wait and watch month over month. So far, the ISM-New York Report on Business has continued to defy expectations. Will next month be another round of record-setting highs? Time will tell.
Please feel free to share your comments and feedback on this month’s report as well as to share it with anyone from your network that you feel would benefit from the information.
Remember to check back in with me on Tuesday, October 2nd for the release of the September ISM-New York Report on Business.