National Association of Purchasing Management

National Association of Purchasing Management - Houston, Inc.

PO Box 771203 - Houston, Texas 77215-1203

NAPM - HOUSTON BUSINESS REPORT

For further information, contact:

Mike Valant, C.P.M., A.P.P.

Miekv1@alltel.net 281 518-8575

Press Release

January 10, 2008

HOUSTON ECONOMY CONTINUES DOWN

Sales, Purchases and Production Leading Components

The Houston Purchasing Managers Index, a leading indicator of regional production, continued deeper into negative territory in December indicating that production in the Houston economy is likely to contract over the next three to four months. The December reading of 45.8 was 3.2 index points below November’s 49.0 reading.

The PMI has a possible range of 0 to 100. Anything over 50 indicates production gains over the near term; anything below 50 signals coming losses.

The Houston PMI is based on diffusion indexes for eight indicators. (A diffusion index is simply the percentage of respondents reporting increases from the previous month less the percentage reporting declines.)

Sales, Production and Purchases were the primary contributors to the December slide, each falling over 10 points from November. By margins of 10% for Sales and 10% for Purchases and 12% for Production, respondents reporting declines over the month out numbered those reporting increases.

Employment remained constant for the month, with 59% indicating a no change, 11% showing an increase and 30% reporting a decrease in manpower. For Sales, 22% reported over-the-month increases, but 49% percent reported declines.

The Houston PMI has fallen sharply since midyear. As recently as May and June, it posted readings above 60, a level that represents a strongly positive outlook. In the 58 consecutive months of readings above 50 before November, 36 were above 60. The Houston PMI averaged 61.7 in 2004, 61.5 in 2005, 62.0 in 2006 and 59.2 in 2007.

Over the 12 months ending November, the Houston PMI has averaged 54.4, dropping below the 56.9 average since it was introduced in January 1995. The latest PMI data show that Houston has finally joined the downward national economic trend.

The overall forecast lacks the sense of optimism that our purchasing managers have expressed about the Houston economy in their responses during 2008.

The NAPM-Houston Business Report began publication in January 1995.

Subscriptions to the report are available through NAPM-Houston.

N. A. P. M. - Houston, Inc. is an affiliate of the Institute for Supply Management