Employment Growth Continues
Price and Inventory Concerns Moderate
(Houston, Texas) – According to Houston supply chain executives, economic activity in the region expanded for the sixth month in a row and the near-term outlook points to continued growth.
The April Houston Purchasing Managers Index registered 56.6, up marginally from 56.5 last month. The four underlying indicators that have the strongest correlation with current economic activity (Employment, Lead Times, Production, and Purchases) showed good performance. The Employment Index registered 60.9, down 1.1 points from its seasonally adjusted reading of 62.0 in March. The Lead Times Index registered 58.3, rising 0.4 points from 57.9. The Production Index registered 53.6, down 1.2 points from 54.8. The Purchases Index gained 5.9 points, increasing from 50.6 in March to 56.5 this month.
The three-month forecast of economic activity registered 55.2, up 1.1 points from its March reading of 54.1. As with last month’s projection, the primary drivers for this improvement were reductions in the Prices Paid and Finished Goods Inventory Indices which registered 54.5 and 48.0 respectively. These measures have a significant inverse correlation with economic activity at all forecast horizons greater than two months. Reductions in these underlying indicators usually result in improved economic activity 3-4 months out.
On an industry specific basis, Wholesale Trade, Health Care, Professional Services, Mid-stream Operations, and Manufacturing are expanding at a strong pace. Oil & Gas and EPC activities are improving. All other sectors are near neutral. From a three-month forecast standpoint, Health Care, Manufacturing, and Mid-stream Operations are expected to continue healthy growth.
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 four-month forecast horizon. These indicators have a possible range of 0 to 100. Readings over 50 generally indicate economic expansion, while readings below 50 show contraction. 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.