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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Higher Oil Prices and Hurricane Recovery Drive Good Start to 2018

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

The price for West Texas intermediate crude oil climbed steadily from about $48 per barrel in late September to $66 by late January. So far in February, we have seen WTI moderate to about $60 per barrel, still substantially above anything seen in 2016 and 2017. The increase in crude oil prices has spurred oil field activity in Texas leading to an uptick in production. The Texas drilling rig count climbed through mid-2017, reaching a plateau of about 450 active rigs through early 2018. The most recent weekly data shows an increase to 479 rigs for the week ending February 1. Even though legacy production declined noticeably through 2017, total oil and gas production in Texas is still ramping up. This shows the importance of new wells to overall production numbers. New well production is associated with a much bigger economic multiplier than production from existing wells, and thus is a key economic driver for the state. Another will be the Houston area’s recovery from Hurricane Harvey, which struck the Texas coast in late August, inundating Houston and nearby areas with record-breaking rainfall. The storm knocked Houston’s energy-recession recovery off-track, resulting in significant, but temporary, job losses last September. Job creation bounced back in October and November and was neutral in December. We expect the Houston area to show ongoing job growth and economic momentum though 2018. Both Dallas and Austin remain on the list for the proposed second headquarters for Amazon and both are favored to make the final four according to the Wall Street Journal (along with Nashville and Raleigh).

For a PDF version of this report click here: TX_Outlook_0218

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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South Texas Recovers from Harvey

November 14, 2017 by Robert A. Dye, Ph.D., Daniel Sanabria

Parts of South Texas were drenched with more than 50 inches of rainfall in late August as Hurricane Har-vey made landfall near Rockport, Texas, west of Houston. The record setting flooding that followed in the Hou-ston area made Harvey one of the costliest natural disasters in U.S. history. Major components of the South Tex-as industrial complex of refineries, pipelines and petrochemical facilities were shut-in due to damage from the storm and also due to the need for employees to tend to their households. Before the hurricane, Texas was showing increased hiring and economic momentum following the oil price downdraft of 2015. In July, the state added 21,700 payroll jobs. However, August, state payrolls showed no net gain, and September saw a net loss of 7,300 jobs. Fortunately, the South Texas industrial complex bounced back quickly. By mid-September most refin-eries had restarted. By the end of October, Gulf Coast refinery runs were near their pre-storm levels. We expect that the industrial base of South Texas will suffer no long-term damage from Hurricane Harvey. However, the consequences to individuals and households in the Houston area will linger. Low-to-middle income households are particularly vulnerable to the combination of lost wages and emergency expenses. Uninsured home repairs will be a further drain on household wealth. Lower home values in flood prone areas will also hurt households. We expect city and regional authorities in South Texas to try to upgrade flood control infrastructure and develop new strategies for future floods. This may put additional pressure on the region’s tax base going forward.

For a PDF version of this report click here: TX_Outlook_1117.

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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