24/7 Wall St.

The Federal Reserve Bank of New York has released a monthly Business Leaders Survey, which is a semi-live reading as the data is for October. This monthly Federal Reserve survey measures the optimism from service firms in the state of New York, northern New Jersey and southwestern Connecticut.

On average, service firms continued to view the business climate as worse than normal and that the optimism around future conditions has deteriorated. Some firms also expressed rather pessimistic view about the future business climate.

According to the New York Fed, the Business Leaders Survey saw its headline business activity index drop by nine points to a reading of −4.3 in October of 2019. This was shown to be the first negative reading in more than two years.

The business climate index was little changed at −14.8 in October, confirming that firms continue to see the business climate worse than normal. The index for future business climate fell four points to −22.8, and that marked the lowest level since early 2009.

On the jobs front, the Fed’s survey indicated that employment levels held steady at a time when wage increases remained fairly widespread.

Input price increases were shown to have picked up slightly in October, but selling prices increased at a slightly slower pace than had been seen in September.

Additional specific data from the report was as follows:

• Some 24% of respondents reported that conditions improved over the month, while almost 29% said that conditions worsened.
• The employment index fell five points to 2.2, and the wages index held steady at 38.7. The index for future employment moved lower, while the index for future wages edged up.
• The prices paid index rose by four points to 43.0, suggesting input price increases picked up a bit.
• The prices received index fell by two points to 18.3, indicating selling prices increased at a slightly slower pace than last month.
• The capital spending index held steady at 14.5, and the index for planned capital spending was little changed at 18.1.

The index for future business activity remained positive but fell another 10 points to 2.2, the lowest level since late 2012. What stands out about the future readings is that this index has now come down by over 25 points in the past three months alone.

Looking at a graph of prior data, the New York Fed showed that the expected conditions were getting closer to a low not seen since October 2011 and November 2012. That said, the current conditions index had seen negative readings since the end of the recession in multiple times in 2011, at the end of 2012 and into the start of 2013, and again from the end of 2015 into 2016.

This New York Fed survey is designed to parallel the Empire State Manufacturing Survey, although it covers a wider geography and the questions are slightly different. The survey is sent on the first business day of each month to the same pool of about 150 high-level business executives in the services sector, and the data are compiled from generally about 100 responses that are received by or around the 10th day of each month.