Houston Economy Strengthens – Corona Virus Concerns Moderate

(Houston, Texas) – According to Houston area supply chain executives, overall economic activity in Houston expanded in August for the third month in a row led by modest expansion in non-manufacturing activities. Manufacturing activities contracted at a very slow pace during the month.

The Houston Purchasing Managers Index rose 4.7 points to 52.6 during the month. Two of the three underlying indicators that have a strong direct correlation with the economy, sales/new orders and lead times, pointed to stronger expansion this month. The third, employment, is now giving a very weak signal for contraction. The sales/new orders index rose 2.8 points in August to 56.5. The lead times index also rose 2.8 points to 54.5. The employment index rose 8.4 points to 49.7. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, rose 1.6 points this month to 51.4, giving a modest contraction signal.

The three-month forecast for the Houston PMI rose 2.3 points to 53.5. This was driven by strengthening in the sales/new orders, production, prices paid indices, and lead times indices. These indices have a strong direct correlation with economic activity at the three-month forecast horizon.

On an industry specific basis, real estate joined accommodations and foods services, transportation, utilities, and health care reporting expansion. Oil and Gas joined construction, durable goods manufacturing, and professional services reporting contraction. All other sectors reported near neutral. The three-month forecast for all sectors indicates a belief that the severity of the COVID-19 pandemic will moderate during this time frame.

Ross Harvison, CPSM
ISM-Houston, Inc.
Business Survey Committee Chair

Click here to see the online version and here to see the PDF version of the full report.

Houston Economy Expanded at a Slower Pace in July

(Houston, Texas) – According to Houston area supply chain executives, overall economic activity in Houston expanded in July for the second month in a row. Manufacturing activity contracted at a modestly faster pace.

The Houston Purchasing Managers Index fell 1.6 points to 47.9 during the month. Two of the three underlying indicators that have a strong direct correlation with the economy, sales/new orders and lead times, pointed to expansion again this month. The third, employment, continues to give a strong signal for contraction. The sales/new orders index fell 3.1 points in July to 53.7. The lead times index was unchanged at 51.7. The employment index fell 3.5 points to 41.3. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, fell 8.5 points this month to 49.8. This is a positive signal as it indicates that companies are getting inventories under control after the rapid fall in demand in the second quarter caused significant inventory increases.

The three-month forecast for the Houston PMI fell 2.7 points to 51.2. This was primarily driven by weakening in the sales/new orders, production, and prices paid indices. These indices, along with the lead times index, have a strong direct correlation with economic activity at the three-month forecast horizon.

On an industry specific basis, accommodations and foods services, transportation, utilities, and health care reported expansion again this month. Real estate, oil and gas, and nondurable goods manufacturing reported near neutral. Construction, durable goods manufacturing, and professional services continued to report contraction. The three-month forecast continues to be highly uncertain as further economic improvement is dependent on the severity of the COVID-19 pandemic.

Ross Harvison, CPSM
ISM-Houston, Inc.
Business Survey Committee Chair

Click here to see the full online report.

ISM-Houston notes that the Houston economy returned to expansion in June

(Houston, Texas) – According to Houston area supply chain executives, overall economic activity in Houston expanded in June for the first time in four months. Manufacturing activity continued to contract, although at a much slower pace.

The Houston Purchasing Managers Index rose 9.3 points to 49.5 in June. Two of the three underlying indicators that have a strong direct correlation with the economy, sales/new orders and lead times, are now pointing to expansion. The third, employment, while improving significantly continues to give a strong signal for contraction. The sales/new orders index rose an additional 20.4 points this month to 56.8. The lead times index was relatively unchanged at 51.7. The employment index rose 6.7 points to 44.8. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, fell 5.3 points this month to 58.3.

The three-month forecast for the Houston PMI rose 8.2 points to 53.9. This was primarily driven by improvements in the sales/new orders, production, and prices paid indices. These indices, along with the lead times index, have a strong direct correlation with economic activity at the three-month forecast horizon.

On an industry specific basis, accommodations and foods services, transportation, utilities, and health care reported expansion this month after a very weak report in May. Real estate, oil and gas, and nondurable goods manufacturing reported near neutral. Construction, durable goods manufacturing, and professional services continued to report contraction. The three-month forecast is highly uncertain as further economic improvement is dependent on the severity of the COVID-19 pandemic.

Ross Harvison, CPSM
ISM-Houston, Inc.
Business Survey Committee Chair

Click here to see the full online report.

ISM-Houston notes that the Houston economy is Contracting at a Slower Pace

(Houston, Texas) – According to Houston area supply chain executives, economic activity in Houston contracted at a slower pace in May than it did in April. Overall economic activity has now contracted for three months.

The Houston Purchasing Managers Index rose 5.6 points to 40.2 in May. Two of the three underlying indicators that have a strong direct correlation with the economy, sales/new orders and employment, improved but continue to point to contraction. The third, lead times, is giving what is believed to be a contradictory signal of near term modest expansion, however, this signal for improvement is most probably caused by supply chain disruptions rather than a supply shortages. The sales/new orders index rose 15.2 points to 36.4. The employment index rose 8.1 points to 38.1. The lead times index fell 5.6 points to 51.5. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, rose an additional 12.5 points this month to 63.6, its highest level on record.

The three-month forecast for the Houston PMI rose 3.8 points to 45.7. This was primarily driven by an increase in the sales/new orders index with a negative offset caused by a lower lead times index. These indices have a strong direct correlation with economic activity at the three-month forecast horizon.

On an industry specific basis, no sector reported expansion this month. Transportation, utilities, wholesale trade, health care, and real estate reported near neutral. Oil & gas, construction, manufacturing, professional services, and accommodations/food services all reported significant weakness. From a three-month forecast standpoint, all sectors are anticipated to show moderate to strong improvement if the economic impact of the COVID-19 virus continues to improve.

Ross Harvison, CPSM
ISM-Houston, Inc.
Business Survey Committee Chair

Click here to see the full online report.

Capability Assessments

We have proven process maturity model based methods and benchmarking techniques to help you understand where you are compared to your peers and the performance leaders. We’ll work with you to create a transformation plan based on this assessment with a target to implement known, highly effective, procurement practices while meeting your total cost of ownership targets. We’ll also help you execute this plan, ensuring that you deliver both near term quick hits and longer term differential improvement.

READ MORE ABOUT PROCUREMENT CAPABILITY ASSESSMENTS

READ MORE ABOUT OPERATIONS CAPABILITY ASSESSMENTS

ISM-Houston Notes That the Houston Economy is Contracting at a Rapid Pace

(Houston, Texas) – According to Houston area supply chain executives, both goods and services producing activities in Houston contracted further during April. Overall economic activity is now contracting at its fastest rate since the ISM-Houston Business Survey began in 1995.

The Houston Purchasing Managers Index fell almost 6 points to 34.6 during April. Two of the three underlying indicators that have a strong direct correlation with the economy, sales/new orders and employment, are now pointing to significant contraction. The third, lead times, is giving a contradictory signal of near term expansion, however, it is believed that higher lead times are currently being caused by supply chain disruptions rather than a supply shortages. The sales/new orders index fell 9 points to 21.2, its lowest level since our survey began. The employment index fell 11 points to 30.0, approaching the lows seen in the great recession. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, rose almost 2 points to end above neutral.

The three-month forecast for the Houston PMI fell an additional 2.3 points to 41.9. This was primarily driven by degradation of the sales/new orders and prices paid indices, with a positive offset allowed by the increasing lead times index. These indices have a strong direct correlation with economic activity at the three-month forecast horizon. Note that this drop would have been greater if not for the unusual impact of supply chain restrictions on the lead times index.

On an industry specific basis, no sector reported expansion overall. Oil & gas, construction, manufacturing, mid-stream operations, professional services, and health care all reported significant weakness. From a three-month forecast standpoint, modest improvement is predicted if the effects of the COVID-19 virus moderate quickly.

Ross Harvison, CPSM
ISM-Houston, Inc.
Business Survey Committee Chair

Click here to see the full online report.

Procurement Benchmarking

Significant procurement transformation is hard. If you are like most procurement leaders, you’ve already started a strategic sourcing effort to get quick savings, but you’re finding it hard to figure out what to do next. Do I improve my IT systems to gain efficiency and reduce errors? What if I focus on cleaning up my master data to better understand and control my spend? Should I modify my processes to align them with those I know to be highly effective? Do I focus on changing my organization and improving my staff capability? By now, you’ve probably concluded that you will need to do all of this and more, but you’re struggling to prioritize your efforts.

READ MORE

ISM-Houston Notes That the COVID-19 Virus is Impacting Houston Area Operations

(Houston, Texas) – According to Houston area supply chain executives, goods producing industry activity in Houston contracted this month after showing expansion for only one month. Services producing industry activity expanded for the second month. Overall economic activity continues to expand at a moderate pace. Many respondents indicated that the COVID-19 virus is affecting their business activities.

The February Houston Purchasing Managers Index fell to 50.2 from last month’s level of 52.4. Only one of the three underlying indicators that have the strongest direct correlation with economic activity, lead times, is now pointing to expansion. The other two indicators with a strong positive correlation, sales/new orders and employment, are now showing potential contraction. The lead times index rose 1.3 points to 52.5. The sales/new orders index rose 2.0 points to 49.7. The employment index fell 9.7 points to 48.6. The underlying indicator that has the largest inverse correlation, finished goods inventory, fell 9.0 points to 46.3.

The three-month forecast for the Houston PMI rose 0.2 points to 51.4. Improvement in the sales/new orders and lead times indices where offset by softening of the prices paid index. These indices have a strong direct correlation with economic activity at the three-month forecast horizon.

On an industry specific basis, durable good manufacturing, utilities, wholesale trade, and health care reported expansion. Construction and professional services joined oil & gas in reporting contraction. From a three-month forecast standpoint, modest improvement is predicted if the effects of the COVID-19 virus are minimal.

Ross Harvison, CPSM
ISM-Houston, Inc.
Business Survey Committee Chair

Click here to see the full online report.

Procurement Transformation Value

A procurement transformation effort can reduce your costs significantly. For a typical implementation, you will see annual cost savings of 4 to 9% on your services and indirect materials spend. You will also capture fixed cost savings of 20 to 30%. With normal program execution costs equal to 1 to 2% of one year of spend, depending on your organizations size and current capabilities, most procurement organizations will break even during the third year of program execution.

READ MORE