(Houston, Texas) – According to Houston area supply chain executives, goods producing industry activity in Houston expanded this month for the first time since September. Services producing industry activity also returned to expansion after two months reporting contraction. Overall economic activity is now expanding at a moderate pace.
The January Houston Purchasing Managers Index rose significantly to 52.5 from last month’s level of 47.4. Two of the three underlying indicators that have the strongest direct correlation with economic activity, employment and lead times, are now pointing to expansion. The third underlying indicator with a strong positive correlation, sales/new orders, remains below neutral. The employment index rose 11.1 points to 58.3. The lead times index rose 0.7 points to 51.2. The sales/new orders index rose 3.6 points to 47.7. The underlying indicator that has the largest inverse correlation, finished goods inventory, rose 7.9 points to 55.3.
The three-month forecast for the Houston PMI rose 1.5 points to 51.2. Strengthening of the sales/new orders, prices paid, and lead times indices drove most of this increase. These indices have a strong direct correlation with economic activity at the three-month forecast horizon.
On an industry specific basis, construction, manufacturing, mid-stream operations, utilities, professional services, and health care reported expansion. Oil & gas and wholesale trade reported further contraction. From a three-month forecast standpoint, modest improvement is predicted.
The Houston PMI provides a measure of current economic activity in the greater Houston area and a forecast of likely shifts in activity over a three-month forecast horizon. These indicators have a possible range of 0 to 100. Readings over 50 generally indicate goods producing industry expansion; readings below 50 show contraction. A PMI above 45 generally correlates with expansion of the Houston-The Woodlands-Sugar Land Business Cycle Index. The current and forecast PMI indices are based on diffusion indices for eight underlying indicators: Sales/New Orders, Production, Employment, Purchases, Prices Paid, Lead Times, Purchase Inventory, and Finished Goods Inventory.
The Institute for Supply Management – Houston has published the Houston Purchasing Managers Index monthly since January 1995 as a service to its members and the greater Houston business community.