May 2019 AZ Economic Outlook

May 13, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Sunny Outlook for Arizona’s Economy

The Arizona economy ended 2018 on a strong note with GDP growth up 3.4 percent in Q4. For the full year 2018, Arizona GDP was up 4.0 percent, making Arizona the fourth fastest growing state economy in the U.S. last year. Job growth slowed somewhat in the first quarter of 2019 as employment in accommodations and food services declined by 2,300 jobs in Q1. The state’s important tourism industry was hurt in Q1 by bad weather and by the longest ever federal government shutdown. The closure of national parks and recreation facilities may have spilled over to state parks as well, which posted year-over-year declines in visitations in January and February. However, Arizona continues to be well positioned to benefit from an ongoing expansion of the overall U.S. economy this year. Arizona tends to benefit from its low cost of living and business friendly environment as the overall U.S. economic expansion matures. Strong inflows of people and businesses are driving up real estate demand in the Phoenix area. RealPage noted that Phoenix area apartment rental prices were up 7.4 percent in 2018 which was about two times the national average. Apartment occupancy for the Phoenix area was at 95.4 percent last year. Office space is also seeing a boost from the inflow of businesses. According to Colliers International, the Phoenix market saw net absorption of office space climb to 850,000 square feet in Q1. This was enough to push the Phoenix office market vacancy rate down to 13.6 percent. Industrial space, which includes warehousing and manufacturing, saw the vacancy rate tighten to a low 7.2 percent in Q1.

For a PDF version of this report, click here: May 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.


 

Read More

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.

Read More

November 2018 AZ Economic Outlook

November 9, 2018 by Robert A. Dye, Ph.D., Daniel Sanabria

Arizona’s Economic Momentum to Continue

The Arizona economy is expected to continue improving into 2019. Our outlook is supported by strong population growth and ongoing job growth. We expect net migration into the state to continue at a moderate pace as the state’s comparatively low taxes and affordable house prices remain significant draws, especially compared with nearby California. We expect to see strong job growth through Q4, supported by gains in the construction, government, and private services sectors. Construction employment is expected to improve further, motivated by a tight housing market, particularly around Phoenix. We forecast Arizona’s real gross domestic product growth to be above the U.S. average through the last half of 2018 and into 2019. However, long-run hurdles for the Arizona economy persist, including low household income and education attainment, which impact spending and the skillsets of the labor force. Despite a high profile teacher walkout in Q2, educational funding continues to face headwinds in Arizona. Voters passed Proposition 126 this November, which prohibits Arizona’s state and local governments from levying sales taxes on most services. Critics of the measure believe it will put additional strain on the state’s educational system. Meanwhile, the resolution of the U.S.-Mexico-Canada Agreement on trade, which remains to be ratified by each country, removes some uncertainty for Arizona businesses moving forward. According to the Census Bureau, 36 percent or $7.6 billion worth of Arizona exports are sent to Mexico, with 10 percent or $2.2 billion to Canada.

For a PDF version of this report, click here: November 2018 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.

Read More

August 2018 AZ Economic Outlook

August 13, 2018 by Robert A. Dye, Ph.D., Daniel Sanabria

The Arizona Economy Is Warming Up

    The Arizona economy has been a laggard in terms of growth through this expansion cycle. However, last year was a turning point for the state’s economy as it grew at its fastest rate since 2006, and is poised to accelerate further in 2018. Some drivers of previous strong growth of the Arizona economy remain in place. Arizona continues to be a popular destination for retiring baby boomers and an affordable alternative to nearby states like California. According to the Census Bureau’s American Community Survey, ex-Californians made up approximately 24 percent of the people who migrated to the state in 2016. The stronger positive net migration has helped Arizona population growth to steadily improve in recent years, which supports the state’s housing and healthcare industries. Tourism, another staple industry for the Arizona economy, continues to benefit from an ongoing expansion in the overall U.S. economy. Total visitors to the Grand Canyon were up 5.2 percent in May compared to May 2017 according to the National Park Service. This is consistent with the improving Arizona hotel occupancy rate in the first half of 2018. Uncertainty surrounding trade remains a headwind for the state’s manufacturing sector. According to the Census Bureau, 36 percent or $7.6 billion worth of Arizona exports are sent to Mexico, 10 percent or $2.2 billion to Canada, and 6 percent or $1.2 billion to China. A bilateral agreement between the U.S. and Mexico is a growing possibility. However, trade issues with China are going in a different direction, with new tit-for-tat tariffs announced on both sides.

For a PDF version of this article, please click here: August 2018 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.
 

Read More

Arizona Builds Economic Momentum | May 2018

May 14, 2018 by Robert A. Dye, Ph.D., Daniel Sanabria

Arizona real gross domestic product was up 3.2 percent in 2017, the highest reading since 2005. Stronger than expected nonfarm payroll gains in 2017 drove state economic activity. Following a large upward revision in Arizona job growth, the most recent estimates now show that Arizona added a net 58,500 jobs in 2017 versus the estimate of 35,000 jobs used in our February Arizona forecast. State job growth was solid through March as employment in the construction, manufacturing and services sectors continued to improve. Steady job growth and relatively high housing affordability and low business costs continue to draw people into the state. According to the official Census Bureau estimates, the Phoenix metropolitan area registered fourth in the nation for largest population growth in 2017, driven by strong gains in Maricopa County. Sustained population growth supports labor force growth which is a key determinant of potential state economic activity. This supports our expectations for a continued moderate expansion of the Arizona economy for the remainder of 2018. The growing Arizona population is also leading to increased demand for housing. Greater demand is keeping the inventory of available houses tight, boosting single-family home prices in Northern Arizona. The Case-Shiller Home Price Index for the Phoenix metropolitan area was up 6.3 percent for the year ending in February. The months’ supply of homes for sale ticked down to 2.3 months’ in March, according to the Arizona Regional MLS. The tight supply of housing will encourage more construction in both single- and multifamily projects in the region this year.

For a PDF version of this report click here: AZ-Outlook-0518.

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.

Read More