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Texas has regained its economic momentum with strong annualized real GDP growth, averaging 4.5 percent, from 2017Q1 through 2017Q4.

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.

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