The March ISM-New York Report on Business: Reversing Course
The March ISM-New York Report on Business was released on April 2nd at 9:45am Eastern and is available for download here. Please see the end of this commentary for additional information on the ISM-New York Report on Business.
In March, New York City purchasing managers changed direction on every index except one - Expected Revenues.
Current Business Conditions rose from 61.1 in February to reach a 4-month high of 66.9 in March. This brings to an end 6 consecutive months of decreases.
The Six-Month Outlook fell from 71.5 in February to a nearly 10-year low of 53.0 in March (referencing the finding of 50.7 in May of 2009). This month's 18.5 point decrease gives back the 13.2 point increase reported from January to February and then some. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, adjusted downward from 60.7 in February to 59.5 in March.
Quantity of Purchases decreased to 61.1 in March after the significant increase seen from 44.7 in January to 65.4 in February.
In February, top line and forward revenue guidance both moved downwards. Current Revenues decreased from a 5-month high of 76.9 in February to 62.5 in March. Expected Revenues fell from 65.4 in February to 62.5 in March, decreasing for the second month in a row. As noted, this is the only index to move in the same direction in February as March, allowing for the only multi-month trend.
Prices Paid increased from 60.7 in February to 66.7 in March.
I always think it is difficult to interpret the ISM-New York Report on Business findings, but this month is a serious challenge. There were almost no trends to track with the (nearly) across the board change in direction. Only Expected Revenues was part of a multi-month trend.
So if the March data is somewhat stranded on its own, let’s consider what the different indices reveal about each other.
Conditions now: Current business conditions were up a solid 5.8 points, but Current revenues are down a more notable 14.4 points. Part of the difficulty in explaining the difference between these two figures is that the survey question for current business questions is a very general perception rather than being tied to a specific metric or even the respondent’s company. It would even be easier to explain if we were talking about profits rather than revenues. We’re left with the idea that purchasing professionals see improving business conditions this month – after 6 months of pessimism – even if their own company wasn’t able to capitalize and grow the top line as a result. This month’s current business conditions is the best news in the March report. Too bad it didn’t translate to gains for the ISM-NY membership.
Conditions in six months: These indices at least both moved in the same direction: down. But while expected revenues was only down a small 2.9 points, the six-month outlook (which, like current business conditions looks at the general business opportunity) dropped 18.5 points – the lowest level in almost a decade. I’m hesitant to put too much stock in the outlook number for now, preferring to wait until May to see what happens in April. If there isn’t a correction, however, and this month’s drop in outlook isn’t an isolated finding, we’ll be in danger of this index falling below the breakeven point of 50.0.
Price & Quantity: These two seem to explain each other. They are very close – 61.1 and 66.7. Prices paid increased 6.0 month over month, and quantity purchased decreased a reasonable (and corresponding) 4.3 points in response.
We won’t find out until May which of the reversals in the March report were the start of new trends. Remember to check back in with me on Thursday, May 2nd for the release of the April ISM-New York Report on Business.
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.