The June ISM-New York Report on Business: Big Changes, Small Changes
The June ISM-New York Report on Business was released on July 2nd at 9:45am Eastern and is available for download here 2020_ISM-New_York_June_ROB_v01.pdf. Please see the end of this commentary for additional information about the ISM-New York Report on Business.
In June, New York City purchasing managers reported significant increases in Current Business Conditions, Six-Month Outlook, and Quantity of Purchases, according to the survey taken by the Institute for Supply Management-New York.
New York Metro
Current Business Conditions rose to 39.5 in June, up from 19.5 in May. For reference, Current Business Conditions were at 51.9 in February, before the pandemic's impact was reflected in the Report's findings.
The Six-Month Outlook rose to 67.1, up from 48.0 in May. The June outlook represents a 10-month high, and exceeds the outlook reported in February by 13.3 points. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, fell to 33.5 in June, down slightly from the 33.9 reported in May.
Quantity of Purchases rose to 44.7, up from the 28.3 reported in May. The June finding represents both a 7-month high and a level 3.0 points above February.
Top line and forward revenue guidance made small moves in opposite directions in June. Current Revenues rose to 30.6, up from 29.2 in May. Expected Revenues fell to 32.4, down from 34.1 in May.
Prices Paid adjusted downward to 60.5 in June, 6.3 points higher than in February.
Obviously, it is good news that the Report indices continue to trend sharply upwards – it is worth downloading the report just to see that hopeful visual V shape. Six-month outlook, quantity of purchases, and prices paid are now at levels above what we saw before the pandemic hit.
The most interesting observations this month follow a division included in the report that I don’t usually carry over to this commentary, and that is the split between New York metro as a whole and company specific. I have included them in the Report Rundown above because they are so relevant this month.
The good news that we are seeing in current business conditions and six-month outlook is related to observations and expectations for the area economy. The fact that the six-month outlook is at a 10-month high (looking back to August of 2019) provides a lot of hope for upward growth and recovery.
What isn’t so great is the view from each company. Current revenues and expected revenues are particularly concerning. Current revenues may be at a 4-month high, but it remains 27.7 points below where it was in February. That is a lot of ground to make up and I don’t think we can expect it to happen quickly.
The same is true of expected revenues, which fell slightly from May to June and remains 17.6 points below February. Since both the outlook and expected revenues look six months into the future, I usually expect them to roughly track together. What we see this month from purchasing managers is the sentiment that the economy as a whole will be in a much stronger place by November, but that their company may continue to struggle with the top line.
Remember to check back in with me on Tuesday, August 4th for the release of the July ISM-New York Report on Business. In the meantime, stay healthy and stay safe.
The 2020 Report Release Schedule is as follows:
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.