Market Intelligence

The January 2021 ISM-New York Report on Business: New Year Optimism Falters

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New York - In January, New York City purchasing managers reported decreased activity in every index except Prices Paid, according to the survey taken by the Institute for Supply Management-New York. The full report can be downloaded here: pdf2021_ISM-New_York_January_ROB_v1.pdf

 

Report Rundown

Current Business Conditions decreased by 10.1 points to a 2-month low of 51.2 in January, down from 61.3 in December.

The Six-Month Outlook surrendered most of the 22.1-point increase reported in December, falling 17.4 points to 53.3 in January. Although this index is no longer oscillating between the 40s and 60s month over month (a 7-month trend that ended in November), we are still observing nearly 20-point monthly swings. The six-month outlook has been a reliable short-run guide for current business conditions over time.

Employment, a seasonally adjusted index, fell 0.6 points from 61.2 in December to 60.6 in January.

Quantity of Purchases fell from a 20-month high of 61.5 in December to an 8-month low of 35.7 in January. This 25.8 drop is the largest mover in this month's report.

Top line and forward revenue guidance both fell in January, albeit by different orders of magnitude. Current Revenues fell from the 10-month high of 57.7 reported in December to a 7-month low 35.7 in January, losing 22 points. Expected Revenues fell 1.2 points to reach 57.1 in January.

Prices Paid rose 6 points from 65.4 in December to 71.4 in January, the highest level reported since May of 2019 (72.4) and the same finding reported in September of 2019.

 

Additional Commentary

Of all the dynamics we are watching, by far the most interesting one is the whiplash from the Six-Month Outlook. Starting in May, this index moved between the 40s and 60s on a monthly basis for seven straight months. Then, in December, it jumped from the 40s to the 70s. This month, we find the outlook at 53.3 – still a nearly 20-point swing, but with one important change. Now, outlook is staying above the breakeven point.

Quick reminder about how these indices work: A finding of 50 means no change in activity from the previous month. Anything under 50 means a slower rate of activity (i.e. growth) and anything above 50 means a faster rate of activity.

If outlook can stay above the breakeven point, we’re at least staying in an environment where things are picking up. The question for procurement professionals is, how much? It is very hard to plan in an environment when every 30 days the attitude shifts from, “well, things are getting a little better, I guess,” to “wow! Things are really turning around!” This affects demand management, it affects choices about which suppliers to focus our attention on, and it will – most definitely – affect our ability to deliver savings.

As we recently heard in a business travel category briefing hosted by Art of Procurement and delivered by Allison O'Sullivan from Chain IQ, historical data is of no use when trying to make forward looking plans. And spending 9 months going from good to bad to good to bad certainly isn’t helping. But at least now we’re not oscillating from contraction to growth, just slower growth to faster growth.

Please join me on March 2nd for the release of the February 2021 ISM-New York Report on Business – we’ll keep following the Outlook wild ride.

 

The 2021 Report release schedule is as follows:

January 5

February 2

March 2

April 5 (Good Friday)

May 4

June 2

July 2

August 3

September 2

October 4

November 2

December 2

 

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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