Respondents Voice COVID-19 Concerns – Goods Producing Activity Contracts

ISM-Houston Business Report – February 2020 |

(Houston, Texas) – According to Houston area supply chain executives, goods producing industry activity in Houston contracted this month after showing expansion for only one month. Services producing industry activity expanded for the second month. Overall economic activity continues to expand at a moderate pace. Many respondents indicated that the COVID-19 virus is affecting their business activities.

The February Houston Purchasing Managers Index fell to 50.2 from last month’s level of 52.4. Only one of the three underlying indicators that have the strongest direct correlation with economic activity, lead times, is now pointing to expansion. The other two indicators with a strong positive correlation, sales/new orders and employment, are now showing potential contraction. The lead times index rose 1.3 points to 52.5. The sales/new orders index rose 2.0 points to 49.7. The employment index fell 9.7 points to 48.6. The underlying indicator that has the largest inverse correlation, finished goods inventory, fell 9.0 points to 46.3.

The three-month forecast for the Houston PMI rose 0.2 points to 51.4. Improvement in the sales/new orders and lead times indices were offset by softening 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, durable goods manufacturing, utilities, wholesale trade, and health care reported expansion. Construction and professional services joined oil & gas in reporting contraction. From a three-month forecast standpoint, modest improvement is predicted if the effects of the COVID-19 virus are minimal.

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Posted in Houston Business Reports.

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