May 2019 Texas Economic Outlook

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

Texas Positioned for Growth in 2019

The Texas economy is poised to have another good year in 2019, supported by higher oil prices and a solid Houston metro area economy. Houston represents about one-fourth of all employment in Texas, and Houston will be a complex story in 2019. The area economy has recovered from the devastating flooding associated with Hurricane Harvey in 2017. Higher oil prices this year will support growth in Houston’s important energy sector. Organic growth for Houston, driven by strong population expansion, is also a significant economic driver for the state. However, even with higher energy prices, Houston faces the unwind of a period of robust expansion in its petrochemical industry. We expect year-over-year job growth in the Houston metro area to remain well above the U.S. average, but it will ease from near 2.5 percent as of March. The Austin metro area will also be an important part of the Texas story in 2019. For much of the past 30 years, Austin has been the fastest growing of the big four Texas metro areas. But through the first quarter of 2019, both Houston and Dallas-Ft. Worth are showing stronger year-over-year job growth than Austin. San Antonio currently trails the group posting 2.0 percent year-over year job growth in March, which is still above the U.S. average of 1.7 percent. The state economy will continue to benefit from the development of Permian Basin oil reserves in West Texas. Development has been hampered by a pipeline bottleneck that will ease this year. The consolidation of Permian Basin production by major oil companies will be a stabilizing force for the state economy.

For a PDF version of this report, click here: May 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 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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November 2018 TX Economic Outlook

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

Texas Is Well Positioned for Growth

The Texas economy is improving rapidly after limping through 2015 and 2016. Support is coming from a revitalized energy sector, a stronger U.S. economy, an improving Houston-area economy and ongoing in-migration to the state. Crude oil prices increased through 2018, from near $58/barrel for WTI crude in early January to $76/barrel in early October. Along with stronger pricing, the Texas drilling rig count increased steadily through the first half of 2018, from 453 rigs in early January to 536 rigs in early June. Since June, the rig count has stabilized near 530 rigs through early November. The rig count is only a rough proxy for all oil field activity, indicating that conditions in the state’s energy sector have improved significantly since bottoming out in 2016. The U.S. economy has also improved. We expect the strong 4.2 percent real GDP growth from Q2 will be the high water mark for the U.S. economy for 2018 and 2019. It came at a good time for Texas, increasing demand for Texas goods and services as Houston was recovering from the floods after Hurricane Harvey. Houston suffered with back-to-back blows coming from a weak oil market in 2014 and Hurricane Harvey. Since late 2017, job growth in the Houston metropolitan area has re-engaged and is on par with 2012 and 2013, when Houston generated about 9,000 net new jobs per month. Texas was still attracting about 50,000 new residents a quarter through 2017. However, as we get to the end of the intercensal period from 2010 to 2020, demographic estimates become more uncertain. We expect the 2020 census data to confirm ongoing strong in-migration to Texas.

For a PDF version of this article, please click here: November 2018 TX 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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August 2018 TX Economic Outlook

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

Texas Is Back

    The Texas economy struggled through 2015 after the price of crude oil and petroleum products plummeted. Even after energy prices started to improve, the Houston area was dealt a severe blow by the unprecedented rainfall that came with Hurricane Harvey last year. Now the skies are clearing for Texas. Energy markets look firm, the Houston area is recovering from the flooding and the U.S. economy is doing well. With U.S. real GDP growth at a strong 4.1 percent annualized rate in the second quarter, we expect Texas to be considerably north of that number, near 6 percent or more when the data is released. Energy has returned as an accelerator for the Texas economy. West Texas is booming with the re-emergence of the Permian Basin as a global oil powerhouse. With the boom comes the risk of a bust. However, we expect that the very strong crude oil production coming out of West Texas will be sustained over decades, requiring significant and permanent economic investment. With a sustained industrial expansion in West Texas, the area’s non-energy economy will also grow. The severe climate and geographic isolation are limiting factors, but we expect to see a permanent expansion in West Texas metropolitan and micropolitan areas. In addition to the build up in oil drilling and production capacity, crude oil and petroleum product transportation projects are adding to Texas’ economic momentum. Pipeline expansion out of the Permian Basin is underway by several companies. Also, the Swiss commodity trading company Trafigura is planning to build the first deepwater oil export terminal in the U.S. near Corpus Christi.

For a PDF version of this article, please click here: August 2018 TX 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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Texas Regains Economic Momentum | May 2018

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

The revised data for Texas real gross domestic product now shows that the state was in a recession from 2015Q2 through 2016Q1. Three out of those four quarters have declining real (inflation adjusted) GDP. The good news is that Texas has regained its economic momentum with strong annualized real GDP growth, averaging 4.5 percent, from 2017Q1 through 2017Q4. We expect the positive momentum for Texas to continue through this year and next. The Texas economy has four key supports this year. First, oil prices have increased to about $70 per barrel for West Texas Intermediate crude oil, and drilling and production activity is increasing as well. This may not be especially visible in the large metro areas in the eastern half of the state, but it is visible in the Permian Basin of West Texas. We have increased our yearend oil price forecast to $75 per barrel. Second, Texas is benefitting from strong in-migration, which ramped up in late 2006 and stayed strong for the state even when oil prices slumped badly through 2015 and 2016. Strong in-migration has fueled overall population growth which, in turn, has broadened the substantial non-energy-related economy of Texas. Third, the Houston economy is stabilizing after the devastating flooding association with Hurricane Harvey. Houston had net-outmigration in 2017 according to the Greater Houston Partnership. We expect that to improve significantly in 2018. Houston experienced erratic job growth from 2015 through 2017. We expect Houston to show consistent job gains this year. The fourth positive for Texas in 2018 is a strong U.S. economy, along with ongoing global growth, which will fuel demand for Texas energy and non-energy exports. Trade with Mexico remains a wildcard, with some uncertainty about a self-imposed May 18 deadline for the U.S. negotiators.

For a PDF version of this report click here: TX-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.

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