The May ISM-New York Report on Business: The Rebound Begins
The May ISM-New York Report on Business was released on June 2nd at 9:45am Eastern and is available for download here: 2020_ISM-New_York_May_ROB_v02.pdf. Please see the end of this commentary for additional information about the ISM-New York Report on Business.
In May, New York City purchasing managers reported across the board increases as gradual re-openings signal the beginning of the end of the coronavirus pandemic shock.
Current Business Conditions rose 15.2 points to 19.5 in May, up from the all-time low of 4.3 reported in April.
The Six-Month Outlook rose 21.6 points to 48.0 in May, up from the all-time low of 26.4 in April. For reference, the Outlook was at 53.8 in the February Report, the last reading before the shutdown effect hit the economy directly. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, rose 4.7 points to 33.9, up from 29.2 in April. It would appear that the 26.3 reported in June of 2009 will stand as the lowest finding on record to date.
Quantity of Purchases rose 20 points to 28.3 in May, up from 8.3 in April, the lowest finding on record.
Top line and forward revenue guidance both rose from the all-time lows reported in April. In May, Current Revenues rose 18.3 points to 29.2 and Expected Revenues rose 10.8 points to 34.1.
Prices Paid rose 12.7 points to a four-month high of 60.9 in May, up from 48.2 in April.
I highly recommend that everyone download the actual ISM-New York Report on Business PDF just to admire the visual of the ‘fishhook’ rebounds. We have a long way to go, but there is something reaffirming about the sharpness of the UP.
The benchmark I am focused on is the February report. I am watching each index to see which rebound the fastest. As you might expect, the forward-looking indices (Six-month Outlook and Expected Revenues) are closer than Current Business Conditions and Current Revenues. Those have a long way to go: 32.4 and 29.1 points respectively.
A point on Employment: as noted above, Employment is the one index that did not bottom out over the last three months. The 2008-2009 recession still holds the dubious title of lowest recording on record. My interpretation of this is the nature of the work done by the companies who participate in the ISM-New York survey. Since they are predominantly professional services firms, their employees have been forced to adjust to working from home, demand is down, and uncertainty is up, but everyone knew it would be temporary. I believe that is what protected this particular index.
And a note on terminology: After consulting with Jonathan Basille, economist and Senior Advisor to the Report, I have used the word ‘rebound’ rather than ‘recovery’ to describe this month’s improvements. Only once the indices reach or surpass the 50.0 breakeven point can we correctly use the term recovery.
Remember to check back in with me on Thursday, July 2nd for the release of the June 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.