The December 2020 ISM-New York Report on Business: Starting 2021 with Lofty Expectations
In December, New York City purchasing managers reported increased activity in every index for the first time since May's report began the slow climb back from the peak of the pandemic's impact, according to the survey taken by the Institute for Supply Management-New York. To download the report, click here: 2020_ISM-New_York_December_ROB_v01.pdf
Current Business Conditions increased by 17.1 points to 61.3, gaining back most of the loss seen in the 20.9 point drop to 44.2 reported in November.
The Six-Month Outlook recovered from the fall seen in November - and then some. December's outlook reached a 16-month high of 70.7, referencing 71.4 in August 2019. This may represent an end to the 7-month oscillation between the 40s and the 60s in this index or an expansion of it. January's finding will make the determination. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, was the largest mover in the report for the second month in a row. Employment increased 26.6 points to 61.2 in December, up from the 5-month low of 34.6 in November. This is also a 16-month high, referencing 69.0 in August 2019.
Quantity of Purchases rose to a 20-month high of 61.5 in December, up from a 6-month low of 40.0 in November (referencing 63.6 in April 2019). This goes hand in hand with the increase seen in the Employment index, as most of the survey respondents work in service industries.
Top line and forward revenue guidance increased in December. Current Revenues rose to 57.7, reaching a 10-month high. Expected Revenues increased to 58.3, a 10.8-point gain over November's finding.
Prices Paid made a small adjustment from 65.0 in November to 65.4 in December.
Economics has a nickname. In the Victorian era, historian Thomas Carlyle described it as the “dismal science”, and it stuck. I, on the other hand, happen to be a natural optimist. For that reason, I’ve always felt like a bit of an impostor serving as the Business Survey Chair for the ISM-New York report on Business (well, that and the fact that I’m not an economist). I’ve shared my experiences in the past – such as working out the initial numbers for each month’s report, cheering for the numbers to be good like I was watching a NASCAR race.
This month I had a new experience for the very first time – don’t worry, this actually brings me to my additional commentary – I saw great numbers across the board and instinctively thought, “This isn’t going to last.” So maybe I’ve officially earned my dismal status.
But, in reality, I don’t think what we saw in December was good news – or bad news. There has been so much up and down over the last 10 months. I think what we’re seeing is continued uncertainty. Take the six-month outlook for instance. It has been going between the 40s and 60s for 7 months. Now this month it is in the 70s. Do I think it will be back in the 40s again next month? Maybe, but it is more likely to be in the low 50s. Continuing the ups and downs, just elevated a bit. Usually, I would look across the indices and look for incremental, steady month-over-month trends. There has been very little of that since February, other than the multi-month plummet from March to May, that is.
What I’m hoping for in January is less like a NASCAR race, where I’m cheering for the fastest possible growth, I’m rooting for slow but steady because that is far more likely to stick – even if we do have to wait a lot longer to cross the finish line.
Please join me on February 2nd for the release of the January 2021 ISM-New York Report on Business.
The 2021 Report release schedule is as follows:
April 5 (Good Friday)
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.
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