Houston Economy Continues to Expand
Higher Prices and Inventories May Put Pressure on Further Growth
(Houston, Texas) – According to Houston supply chain executives, economic activity in the region expanded for the fourth month in February. Additionally, the 3-4 month forecast points to continued growth.
The February Houston Purchasing Managers Index registered 55.6, up from 54.8 last month. The four underlying indicators that have a strong correlation with current economic activity (Employment, Lead Times, Production, and Purchases) showed good performance. The Employment Index registered 61.1, up 3.9 points from its seasonally adjusted reading of 57.2 in January, giving this index its highest reading since January of 2017. The Lead Times Index registered 57.2, falling 0.3 points from 57.5. The Production Index registered 54.1, increasing 0.7 points from 53.4. The Purchases Index registered 53.5, falling 6.1 points from 59.6 in January.
The three-month forecast of economic activity registered 52.1, down 2.7 points from its January reading of 54.8. The primary drivers for this reduction were increases in the Prices Paid and Finished Goods Inventory Indices which registered 64.1 and 55.2 respectively. These measures have a significant inverse correlation with economic activity at all forecast horizons greater than two months. Current higher Prices and Finished Goods Inventory may constrain economic activity 3-4 months out.
On an industry specific basis, Health Care, Wholesale Trade, Transportation, Manufacturing, and Professional Services are now expanding at a strong pace. All other sectors are at or just above neutral. From a three-month forecast standpoint, Health Care, Manufacturing, and Transportation 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.