February 2019 Texas Economic Outlook

February 11, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Texas Benefits from Stabilizing Energy Market

2019 will be another good year for the Texas economy characterized by organic growth, ongoing in-migration of both businesses and people, and stability in energy markets. 2019 state real GDP growth is forecasted to be a little stronger than 2018, however, the pattern is different. State GDP growth in 2018 got off to a relatively modest start in the first quarter and then improved rapidly as oil prices increased through the first nine months of the year. Oil prices reset in 2018Q4 and some energy companies reduced capital spending plans for 2019. In 2019 we expect state economic growth to moderate in the second half of the year as U.S. and global conditions cool. We look for oil markets to gradually tighten this year, but a cooler global economy will keep demand growth in check pushing the year-end price for WTI up to about $60 per barrel. At that price, production will remain strong and pipeline and other energy infrastructure projects will continue to support state economic growth. Non-energy businesses will continue to find Texas a favorable location. Apple announced that they will build a new $1 billion campus in North Austin, adding 5,000 employees to the 6,200 that they already employ in Austin. Dallas will also continue to expand as an IT hub, benefitting from being a large business-friendly location. Houston endured the back-to-back blows of a collapsing energy market in 2015 and a devasting hurricane in 2017 to post renewed strong job growth in 2018, averaging 9,300 net new jobs per month for the year. We expect job growth in Houston to ease in 2019 but remain a significant positive force for the state.

For a PDF version of this report, click here: February 2019 Texas Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.
 

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February 2019 Michigan Economic Outlook

February 11, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Headwinds Ahead for Michigan’s Auto Sector

We expect the Michigan economy to continue to grow through 2019, but we also expect the pace of growth to slow significantly as the year progresses. Michigan’s important auto industry and related durable goods manufacturers are facing increasing headwinds. The global economy is decelerating in early 2019. Economic data from China has been weak and is consistent with cooler GDP growth in 2019. China is an important market for GM, which has reported weaker profits due to softer sales in China. GM has initiated its North American restructuring plan and will eliminate about 4,000 jobs and close 5 plants this year. Europe is also showing signs of cooler economic growth. Ford has announced a restructuring plan for their European division. A downshift in the global economy will be a factor in cooler U.S. economic growth in 2019, and by extension, weaker U.S. vehicle sales. Also, accelerated depreciation due to tax reform may have front-loaded commercial vehicle demand in 2018, thereby reducing demand in 2019. We expect to see U.S. light vehicle sales of about 16.6 million units in 2019, down from 17.2 million units in 2018. Dealer inventory was up by 3 percent at the end of 2018, compared with a year earlier. Inventory expansion could turn into a weight on production if sales drop off this year. While finances are in good shape for most U.S. households, consumer confidence fell in January as the longest federal government shutdown in history dragged on. Good news could come in the form of a trade deal with China that would at least remove the threat of increasing tariffs, and possibly lead to a reduction in trade tariffs. With cooler economic growth and higher mortgage rates, we expect Michigan’s housing market to remain subdued in 2019.

For a PDF version of this report, click here: February 2019 Michigan Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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February 2019 Florida Economic Outlook

February 11, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

The Florida Economy’s Virtuous Cycle Continues

The Florida economy maintained positive economic momentum heading into early 2019. Florida added 231,200 jobs in 2018, up from the 163,900 net new jobs in 2017. In 2019 we expect to see another 230,000 net new jobs. The influx of people moving to the state following Hurricane Maria was a boost to Florida’s labor market in 2018. It increased both the total number of job-seekers and demand for goods and services last year. In Florida, people are attracting jobs, which are attracting more people in a virtuous cycle. We look for net migration to remain positive as workers and retirees continue to flock to the state this year, driving population growth. Florida’s strong population growth also spurred demand for housing in 2018. Single-family existing home sales were up 2.2 percent for the year, according to Florida Realtors. The inventory of existing single-family homes for sale remained tight, supporting an 8.6 percent gain in Florida existing home prices for the year ending in 2018Q3. We expect Florida home price growth to moderate in 2019 as builders supply more inventory this year. The state’s tourism industry has also seen strong growth. Total domestic visitors to Florida was up 7.7 percent year to date through 2018Q3, according to Visit Florida. PortMiami set a record with 5.4 million cruise passengers travelling through its port in 2018. Lower consumer confidence is a downside risk for Florida tourism in 2019. State total trade, the sum of total exports and imports, also improved last year, reaching $126 billion by November 2018. A risk to state trade this year is uncertainty surrounding U.S./ China trade negotiations. We look for ongoing strong population growth to keep the Florida economy on track in 2019 despite U.S. and global headwinds.

For a PDF version of this report, click here: February 2019 FL Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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February 2019 CA Economic Outlook

February 11, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

California’s Economy to Cool in 2019

We expect the California economy to continue to expand in the near term. That said, downside risks to California’s economy have increased and the list of possible accelerators for the California economy has diminished. One item that remains on the plus side for California would be a resolution to the U.S./China trade war which would boost demand for California exports plus bolster overall shipping volumes through California ports. Job growth for the state is moderating. California added 284,300 jobs in 2018, the slowest pace of job growth since 2011. We expect the state to add about 276,000 jobs over the year ending in 2019Q4. Meanwhile, the state’s unemployment rate is near a historical low at 4.2 percent in December, and is expected to decline through 2019. With labor markets this tight, it is hard to see where more workers would come from. The most recent data from the Census Bureau is indicating that California is experiencing a net outflow of people even with a historically tight labor market. Low housing affordability and high business costs are persistent motivators for out-migration. Recent declines in mortgage rates and moderating house price growth across California’s major metropolitan areas will help affordability in the short term, but will not be enough to alter the state’s high cost of living. The rate of house price appreciation has moderated significantly in the second half of 2018 in California’s key cities. According to the Case-Shiller data, San Francisco house prices were up 11.1 percent in March 2018, over the previous year. In November the yearly gain had decreased to 5.6 percent.

For a PDF version of this report, click here: February 2019 CA Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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February 2019 AZ Economic Outlook

February 11, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Arizona Economy to Remain Strong in 2019

Arizona’s economy is expected to improve through 2019. This outlook is largely supported by the state’s continued population and job growth. Net migration into Arizona is expected to continue at a moderate pace. The state’s comparative affordability is a significant draw for businesses and consumers alike, especially when compared with neighboring high-cost California. Although we expect Arizona’s momentum to cool in time, especially as real estate conditions tighten, we forecast Arizona’s real gross domestic product growth to remain above the U.S. average through 2019 and well into 2020. Mid-year population estimates recently released by the Census Bureau show Arizona's headcount at just under 7.2 million as of July 1, 2018, reflecting 122,770 new residents, or a 1.7 percent year-over-year increase. Only Texas, California, and Florida, the country’s three most populous states, have added more people over the same period. While economic growth in Arizona has been strong in recent years, it has not come without its share of growing pains, particularly with regard to the state’s strained educational system and infrastructure. To accommodate the influx of new arrivals to the state, Arizona has committed to improving many of its roadways, including nearly $200 million over the next three years to significantly expand Interstate 17, the Phoenix metro area’s primary north-south freeway. Along with the state’s improving housing market, infrastructure projects like these will contribute to another year of strong construction activity and employment in Arizona, and add to overall job growth.

For a PDF version of this report, click here: February 2019 AZ Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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