The December ISM-New York Report on Business was released on January 3rd 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 December, New York City purchasing managers reported the lowest Current Business Conditions since 2016 while indicating a significant intent to hire in January.
Current Business Conditions fell after two months of moderate gains, reaching a 3.5 year low of 39.1 in December (referencing 37.2 in May 2016).
The Six-Month Outlook nudged upward to 64.2 in December, rising for the third consecutive month. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, a seasonally adjusted index, recovered from the drop below the breakeven point reported in November, rising by 14.3 points to a 4-month high of 60.8 in December. Employment was also the biggest mover in the report for the second month in a row.
Quantity of Purchases fell to a 3-month low of 44.4 in December, down from the 3-month high of 48.0 reported in November.
In December, top line and forward revenue guidance once again moved in opposite directions. Current Revenues fell to a 3-month low of 52.8, down from 56.3 in November. Expected Revenues rose to 50.0, the breakeven point, in December, up from the drop to 45.7 in November.
Prices Paid fell for the third month in a row, reaching 59.4 in December, down from 62.0 in November.
When I look at this month’s report in total, nearly all of the findings make sense together and indicate relatively good news. The only thing that is down that we want to be up is current revenues, and that is only down by 3.5 points. What really stands out is current business conditions. As noted above, not only are current conditions at a 3.5 year low, they dropped by 11.3 points month over month.
It is hard to get a read on exactly what the ISM-New York purchasing managers are referring to with this finding because the survey question literally just asks how they think business conditions this month compare to those of the previous month. I can offer up that the low finding was predominantly driven by respondents who felt December was “somewhat worse” than November.
Let’s take that at face value and think about the other major mover this month: employment. Employment rose 14.3 points to a 4-month high of 60.8 in December. Add to this that the six-month outlook is up (a bit), prices paid are down for the third month in a row and expected revenues are up. Those are all good things. I find myself wishing that we had a measure of demand, but that would be incredibly difficult given the fact that most of the respondents are in professional services.
If I were to paraphrase the December findings, I might say, “Things are somewhat worse right now, but let’s hire people!” It doesn’t seem like a straightforward economic position. I’ll be watching current business conditions closely in January to see if we have a correction or if the other indicators fall into line with this month’s low current conditions.
Remember to check back in with me on Tuesday, February 4th for the release of the January ISM-New York Report on Business.
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.