The July 2020 ISM-New York Report on Business: The Rebound Continues
The July ISM-New York Report on Business was released on August 4th at 9:45am Eastern and is available for download here 2020_ISM-New_York_July_ROB_v01.pdf. Please see the end of this commentary for additional information about the ISM-New York Report on Business.
In July, New York City purchasing managers reported several 5- and 6-month highs while the Six-Month Outlook lost the gains reported in June, according to the survey taken by the Institute for Supply Management-New York
“While the improvement to Current Business Conditions is encouraging, the drop in Outlook is something to watch,” said Kelly Barner, ISM-New York’s Business Survey Chair and Owner of Buyers Meeting Point. “As more of the indices reach the breakeven point for multiple consecutive months, planning confidence can increase.”
New York Metro
Current Business Conditions rose 14 points to 53.5 in July, increasing for the third month in a row and reaching a 15-month high. This month marks the first time Current Business Conditions have been above the breakeven point since February.
The Six-Month Outlook fell 17.5 points to 49.6, down from the 10-month high of 67.1 reported in June. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, rose 16.8 points to reach a 6-month high of 50.3. Employment has not been above the breakeven point since January.
Quantity of Purchases fell 2.7 points to 42.0 from the 7-month high of 44.7 reported in June. Quantity has now been below the breakeven point since August of 2019, when it was at 50.0. It has not been above the breakeven point since May 2019, when it was at 56.6.
Top line and forward revenue guidance both increased for consecutive months but failed to reach the breakeven point in July. Current Revenues rose 13.2 points to a 5-month high of 43.8, up for the third straight month. Expected Revenues rose 7.2 points from 32.4 in June to 39.6 in July, marking the second consecutive month of increases and a 5-month high.
Prices Paid rose to a 6-month high of 64.0, up 3.5 points from June’s 60.5.
This month we have some good news and some worrisome things to watch. While the improvement to Current Business Conditions is encouraging, the drop in Outlook is disappointing. As more of the indices reach the breakeven point for multiple consecutive months, planning confidence can increase.
I know I do this periodically, but this month seems like a good time to remind everyone that since the ISM-New York Report on Business is based on diffusion indices, recording trends not levels, we have to think about the findings a little differently.
For instance, a large increase month over month right now is something we would expect to see as the economy rebounds. But we need multiple months of large increases to make up for the losses we have experienced. When Current Business Conditions was at 4.3 in April, it wasn’t an indication that the economy or level of business activity was ‘small’ but that it was shrinking at a quick pace.
Here’s a specific case: employment. Employment is the one index that didn’t bottom out over the last few months. In June of 2009, employment was 26.3, while in April it was 29.2. It wasn’t by much, but levels of employment contracted faster in 2009 than they did during the pandemic shutdown.
Remember to check back in with me on Wednesday, September 2nd for the release of the August 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.