ISM-Houston Business Report – March 2020
(Houston, Texas) – According to Houston area supply chain executives, both goods and services producing activities in Houston fell considerably this month. Overall economic activity is now contracting for the first time since the 2015-2016 Houston area downturn. Nearly all survey respondents indicate that the Covid-19 pandemic has had a significant impact on their businesses.
The Houston Purchasing Managers Index fell almost 10 points to 40.3 during March. All of the underlying indicators that have a strong direct correlation with economic activity (sales/new orders, employment, and lead times) are now pointing to contraction. The sales/new orders index fell 19.5 points to 30.2, its lowest level since the 2008-2009 recession. The employment index fell 7.6 points to 41.0 and the lead times index fell 3.2 points to 49.3. The underlying indicator that has the strongest inverse correlation with economic activity, finished goods inventory, rose 3.0 points to 49.3.
The three-month forecast for the Houston PMI fell 7.2 points to 44.2. This was primarily driven by degradation of the sales/new orders and lead times indices with minimal offset provided by a small improvement 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, only health care indicated expansion. Oil & gas, construction, manufacturing, mid-stream operations, utilities, wholesale trade, and professional services all reported significant contraction. From a three-month forecast standpoint, modest improvement is predicted if the effects of the COVID-19 virus moderate.
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