The April ISM-New York Report on Business: Lofty Long-term Expectations
The April ISM-New York Report on Business was released on May 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 April, New York City purchasing managers indicated significantly higher six-month outlook and expected revenues.
Current Business Conditions rose from 66.9 in March to 77.3 in April to reach the highest level seen in over 12 years (referencing the 80.5 reported in July 2006).
The Six-Month Outlook rose from the 10-year low of 53.0 in March to a 7-month high of 77.8 in April. The increase of 24.8 points in one month is only exceeded in the April Report by the increase in Expected Revenues. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, rose to a 5-month high of 66.0 in April, up from 59.5 in March.
Quantity of Purchases increased to 63.6 in April, up from 61.1 in March.
In April, top line and forward revenue guidance both increased - just slightly in the short term but far more significantly in the longer term. Current Revenues nudged upward to 63.6 in April from 62.5 in March. Expected Revenues rose 32.5 points from 62.5 in March to 95.0 in April. This is the highest finding for Expected Revenues since the indicator was added to the Report in February 2012 by 7.5 points (referencing the 87.5 reported in August of 2018).
Prices Paid decreased from 66.7 in March to 63.6 in April.
Without a doubt, the most interesting finding from this month’s report is the expected revenues index. At 95.0, it is big in every way: highest level ever, highest increase in the report this month, and just plan high in terms of growth indication. I pair it with the increase and high level of the six-month outlook because both look forward to November 2019.
While 61% of this month’s respondents expect business conditions in the New York metro area to be better in six months (including 15% that believe they will be much better), 70% anticipate increased revenues in 6 months. From my perspective this indicates sort of a ‘double optimism’. Not only do these purchasing managers believe conditions overall will improve, they believe their firm will outperform the market as a whole – one that they believe will be generally strong. That goes beyond optimism to become just plain confidence – the kind of confidence that fuels disruptive innovation and competitive advantage in professional services.
Short term conditions are up as well, but not by as much and not equally represented by business conditions and current revenues. Current business conditions are at a 12 year high, while current revenues are up by just one point in April over March – the smallest movement in this month’s report.
All in all, this was a good month directionally speaking. Everything was up except prices paid (the only index procurement would want to be down). If you are interested in learning more from a national perspective, ISM is hosting a webinar on May 8th during which Timothy R. Fiore, Chair of the Manufacturing Business Survey Committee, will present a spring update on the economy from both manufacturing and non-manufacturing perspectives.
Remember to check back in with me on Tuesday, June 4th for the release of the May 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.