The August ISM-New York Report on Business: More Up Than Down
The August ISM-New York Report on Business was released on September 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 August, New York City purchasing managers expressed optimism across a number of indices, most notably in employment and those that are forward-looking.
Current Business Conditions recovered from the 3+ year low of 43.5 reported in July to reach a 4-month high of 50.3 in August. Despite the drop seen last month, August's finding is nearly the same as the 50.0 reported in June.
The Six-Month Outlook continued the upward movement started last month to reach a 4-month high of 71.4 in August, up from 63.2 in July. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, increased from 57.1 in July to 69.0 in August, reaching a 9-month high.
Quantity of Purchases increased for the second month in a row, reaching the breakeven point of 50.0 in August after increasing 12.4 points to 46.6 in July. Despite the fact that Quantity is at the breakeven point this month, the finding is also a 3-month high.
In August, top line and forward revenue guidance moved in opposite directions, but both stayed at or above the breakeven point. Current Revenues fell from 53.2 in July to 50.0 in August. Expected Revenues was the biggest mover of the month, increasing 16.2 points from 66.1 in July to a 4-month high of 82.3 in August.
Prices Paid eased from 68.3 in July to 66.1 in August.
If you go back to last month’s report commentary (available here), you’ll remember that I was focused on volatility and visibility because there were no directional trends. Any time we go for multiple reports without any multi-month trends, it can be taken as an indication that purchasing managers are unsure about what the future will hold, usually in response to uncertain macro conditions, things like tariffs, Brexit, employment, etc. They provide us with the best assessment of business conditions the have, but there is no continuity of sentiment from month to month.
In August, both the six-month outlook and purchasing quantities were up for the second month in a row. If one or both of those increases again next month, we’ll have some trends to talk about.
While this month’s index numbers aren’t huge, there is some good forward-looking news – especially for the professional services-heavy New York Metro area. The six-month outlook and expected revenues, both of which refer to February 2020, are at four-month highs. Employment, closely correlated with forward looking profitability in professional services, are at a nine-month high.
The last interesting point from the August report is current business conditions. They went from 50.0 (the breakeven point, meaning no growth or contraction over the previous month) in June, to a three plus year low of 43.5 in July, back to 50.3 in August. Something clearly spooked respondents last month for them to report such a low number, so we’ll get a better read on their confidence in October when we review the September report. Going back to my points about volatility and visibility, hopefully there will be evidence of stability – even if we don’t see significant growth.
Remember to check back in with me on Wednesday, October 2nd for the release of the September 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.