Houston Economy Returns to Expansion

(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.

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Posted in Houston Business Reports.