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First Cut: New York Fed Business Leaders Survey showed service sector activity crashed in April

The general business activity index in the New York Fed’s Business Leaders Survey crashed to -76.5 in April from -13.1 in March. The six-month outlook was also lower, although not as severely with a reading of -30.7 after -13.7.  New York has been one of the areas hardest hit by the spread of COVID-19 and had essentially shutdown nonessential service businesses. The drop in the index for the business climate was close to its lowest possible level at -94.3 in April after -29.0 in March. The index for plans for capital spending fell to -33.2 after 5.0.

Unsurprisingly, the April index for employment fell sharply to -38.7 after 4.9 in March and wages were softer at -11.4 after 46.5.

The index for prices paid fell to 8.7 in April after 36.9 in March, reflecting the declines in energy costs. Prices received were down to -13.2 after 20.6 with businesses losing all pricing power during the crisis.

The New York index for services has a modest correlation (0.652) with the ISM Non-Manufacturing Index. Its precipitous decline bodes poorly for the national measure when it is released at 10:00 ET on Tuesday, May 5. The ISM index for the service sector had managed to hold on to expansion at 52.5 in March, but April will be a different story.

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