Services Lead Expansion
(Houston, Texas) – According to Houston area supply chain executives, overall economic activity in Houston expanded in September for the fourth 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 rose a modest 0.8 points to 53.4 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 still giving a weak signal for contraction. The sales/new orders index rose 2.7 points in September to 59.2. The lead times index also rose 1.0 points to 55.5. The employment index fell 1.0 points to 48.7. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, fell 1.8 points this month to 49.6, giving a modest expansion signal.
The three-month forecast for the Houston PMI rose 0.6 points to 54.1. 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, wholesale trade joined real estate, accommodations and foods services, transportation, and health care reporting expansion. Durable goods manufacturing and professional services reported contraction. All other sectors reported near neutral. The three-month forecast predicts modest improvement for all sectors assuming the severity of the COVID-19 pandemic will not worsen during this time frame.