Monthly Update: Purchasing Managers Index

January '20

Published on 2/10/21

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Houston’s economic expansion strengthened in January, reversing a downward trend that began in October, according to the most recent Houston Purchasing Managers Index (PMI). The January ’21 PMI of 52.6 is the sixth consecutive month above 50 and the third highest reading in the past 12 months. Readings above 45 correlate with expansion of the service side of Houston’s economy, below 45 a contraction, while readings above 50 signal expansion in Houston’s goods producing sectors, below 50 a contraction.

The PMI fell to 34.6 in April ’20, the lowest reading on record, but steadily improved through the summer and into fall. From October to December, as local COVID cases increased, the PMI began trending downward. The January reading is the first month-over-month increase since September.

The index is composed of eight underlying indicators: sales or new orders, production, employment, purchases, prices paid for major purchases, lead times from sellers, purchased materials inventory (raw materials and supplies), and finished goods inventories. In the January PMI, two of the three sub-indexes that strongly correlate with growth—sales/new orders and lead times—pointed to expansion while the employment index continued to signal contraction.

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On an industry specific basis, durable goods manufacturing, transportation and health care showed strong expansion. Non-durable goods manufacturing and oil and gas showed modest expansion. Professional services was near neutral.

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