(Houston, Texas) – According to Houston area supply chain executives, overall economic activity in Houston expanded in October for the fifth month led by improving expansion in non-manufacturing activities. Manufacturing activities contracted at a very slow pace again this month.
The Houston Purchasing Managers Index fell a modest 0.2 points to 53.2 during the month. Two of the three underlying indicators that have a strong direct correlation with the economy, sales/new orders and lead times, continue to point to strong expansion. The third, employment, is still giving a weak signal for contraction. The sales/new orders index rose 1.7 points in October to 60.9. The lead times index fell 1.3 points to 54.2. The employment index fell an additional 1.5 points to 47.2. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, fell 1.5 points this month to 48.1, maintaining a modest expansion signal.
The three-month forecast for the Houston PMI fell 1.1 points to 53.0. This was driven by weakening production, prices paid, and lead times indices offset modestly by strengthening in the sales/new orders index. These indices have a strong direct correlation with economic activity at the three-month forecast horizon.
On an industry specific basis, construction joined wholesale trade, accommodations and foods services, and health care reporting expansion. Durable goods manufacturing reported contraction. All other sectors reported near neutral. The three-month forecast predicts modest improvement for all sectors depending on the severity of the COVID-19 pandemic.