The ISM-New York Report is a highly regarded indicator of business conditions in the New York Metro area including a six-month outlook, employment index, and current and expected revenues.
For anyone new to either the ISM-New York Report on Business, or the national or other regional reports for that matter, the survey results are compiled as diffusion indices – meaning we take the percent of positive responses plus one-half of those responding that conditions remained the same (which we consider positive). A reading of 50% means no change from the prior month, greater than 50% indicates a faster pace of activity, and less than 50% a slower rate. Each month is not so much a reading of the current level of activity as it is a trend up, down, or the same from the previous month. As I run through the numbers in a minute, you can consider anything above 50 good news and anything under it… well, not so much.
A note specific to the New York Metro area, where all of this report’s respondents are located: they are predominantly in services industries: information services, finance, insurance, scientific, technical, and educational. While I’m sure that does not come as a surprise, it is important to keep in mind when you think about the trends being reported by purchasing managers through this report.
With that background, let’s transition to this month’s report.
In March, New York City purchasing managers reported small adjustments to the large changes we saw in February.
New York Metro
Current Business Conditions were at 54.0 in March, down half a point from February, when they dropped 18 points off of January’s 11 year high of 72.5. This index made the smallest month over month change in the March report.
The Six-Month Outlook ended two consecutive months of decline, increasing 65.6 in March from 64.7 in February. The six-month outlook has been a reliable short-run guide for current business conditions over time.
Employment, one of our seasonally adjusted indices, was 53.5 in March, moving back above the breakeven point after coming in at 46.7 in February. Quantity of Purchases decreased to 54.2 in March, down from 55.6 in February.
Top line and forward revenue guidance moved downward together. Current Revenues decreased to 50.0 (the breakeven point) in March, down from 61.8 in February. This was the biggest move, up or down, in this month’s report. Expected Revenues fell to 68.2 after two months of increases and Prices Paid increased to 66.7.
As I’ve shared in the past, I have to focus really hard to work my way slowly through the survey responses and seasonal adjustments. I’m always so eager to see what this month’s numbers will be and compare them to the prior month.
This month was tough at first because the movement on the majority of the indices was relatively small. That, of course, is when I remind myself that these numbers are not fixed activity measurements, they are trends up and down over last month. So what we basically got this month was a ‘more of the same’ reading on everything except prices paid and current revenues – a dynamic that may very well be related.
If you listened to the news in March, you are probably surprised that the world didn’t end four times this month. Here are just some examples of the bad news we were subjected to this month:
- A number of Wall Street Forecasters (including Bank of America Merrill Lynch) revised their Q1 GDP estimates down, although they did note that they still expect good results from the rest of the year.
- President Trump levied tariffs on Chinese imports of aluminum and steel, sparking fears of a global trade war.
- Facebook’s data privacy woes caused investors to panic, concerned that tech companies would face increased regulatory oversight.
- There were also a number of high visibility bankruptcies in March, including Claires Stores, Winn-Dixie, Remington, The Weinstein Company, and the parent company of iHeartRadio, not to mention the start of the Toys R Us liquidation – which for many of us was like watching a piece of our childhood die.
And yet, the purchasing managers in the New York Metro area effectively shrugged their shoulders and reported more of the same. It is a reminder to all of us to look for hard connections between the news we hear and what is happening in our local market or company. Letting overly hyped sentiment run away with us is not a recipe for success.
The markets – and businesses for that matter – prefer stability. The question is how long it will last.
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