amarillo economic forecast for 2012

2011 Recap

2011 was our 2nd good year, but choppiness began mid-year due to the drought. Our rebound in retail sales was driven by job growth and higher commodity prices. Vehicle sales rose and Amarillo housing stayed steady. Manufacturing job growth rebounded. Farm incomes were hurt by drought, and ranches liquidated cattle herds; but feedyards and dairies made good profits.

Areas of Economic Strength

Retail sales up sharply.
Job growth good (not great) but steady.
Feedlots and dairy were solidly profitable.
Farmer's crop insurance saves farm incomes.
Oil boom continues in eastern Panhandle.
Housing starts and prices remain steady due to low rates.
Apartments had better occupancy and higher rents.

Areas of Economic Weakness

Drought depressed farm income (and everyone's attitude).
Lower yields were partly offset by high prices and insurance.
Commercial construction is slowing in the 4th quarter.
Low interest rates hurt savers.

2012 Forecast

Optimism for 2012 due to stronger employment and profitable businesses should boost Amarillo's retail sales and housing market. Lack of any bubbles should give slow, steady increases in vehicle sales, travel, and real estate prices. Local job growth and our oil boom should offset declines from agri-business.

Outlook for specific sectors

Real Estate

Home prices, new starts, and sales were all steady near the levels of the last two years (even though about 40% of applicants don't qualify for mortgages up from only 5% four years ago). Apartments have done well, commercial occupancy is good and land values are steady; although commercial projects have slowed and will be weak for the first half of 2012. We expect steady trends in all these categories next year. Low rates will continue to help, but low construction costs may start fading.

Building Permits	2006	2007	2008	2009	2010	2011	2012(est)
Housing Starts	677	655	505	566	509	544	520
Remodels	1,901	1,849	1,515	1,668	2,082	1,945	2,000
Roof Permits	970	967	816	1,015	1,305	1,044	1,000
Comm. Units	594	473	346	355	465	508	400
Total Value (mil)	$387	$408	$409	$384	$385	$315	$290

Retail Sales

Retail sales growth was the brightest star in 2011 (double our forecast growth!) as job gains on top of a steady employment base combined with stock market gains and high commodity prices to increase local consumer confidence. The 8.6% gain is impressive, but the last few months we dropped to a 4% gain as we compared to months last fall when our recovery began. The average of our last two years gets back to our 4.3% long term trend line (where we expect 2012 to be). New car sales were up 20% in 2011 while used were up only 2%. These trends should continue.

Sales Tax Collections
2006	$53,770,280	up 6.4%
2007	$56,076,026	up 4.3%
2008	$59,442,045	up 6.0%
2009	$56,514,271	down 4.9%
2010	$56,863,740	up .1%
2011	$61,805,523	up 8.6%
2012 (est)	$62,611,046	up 5.0%

Consumer Price Index (Amarillo)

Amarillo's CPI has been tracking the national figure with our groceries up 3.4%, gasoline and transportation up 3.7%, and health care up .13%. Utilities have been mixed with natural gas keeping down electric and gas bills, but higher prices and drought skyrocketed water bills. 2012 may see higher prices nationally, coupled with higher local taxes pushing up our local CPI.

C.P.I. Increases:	Amarillo	National
2006	4.6%	3.2%
2007	4.0%	2.8%
2008	6.6%	4.2%
2009	0.3%	-0.4%
2010	0.4%	1.6%
2011	3.1%	3.2%
2012 (est)	4.3%	4.0%

Employment

Major industries increased hiring lead by increases at Bell and AIG, while Pantex, Tyson, and Asarco held steady. Service industries benefited from this primary job growth (although we trailed Lubbock and Midland/Odessa). With construction slowing and Pentagon cuts we will struggle to hold on at the top employers; but good business elsewhere in Amarillo (including medical and tourism) will drive some growth.

(12 Month Average)	Household Survey	Employers Survey	Average Unemployment
2006	127,717	112,500	3.8%
2007	126,583	112,500	3.3%
2008	129,525	113,025	3.5%
2009	124,333	111,882	4.9%
2010	125,817	110,667	5.6%
2011	126,833	112,200	5.7%
2012 (est)	128,000	114,000	5.3%

Agri-Business

Drought hurt the area as farm output was down 60%, while crop insurance kept incomes at about 80% of last year's for some farmers. Area ranchers got rid of pasture cattle, and feedyards are full and profitable driven by strong demand. Higher milk prices gave dairies the best year since 2006. Higher input costs will shrink profit margins next year. La Nina forecast gives concern for agri-business as insurance will not be as generous and small cattle herds will cramp ranch operations, but cattle prices are wonderful. We look for lower overall incomes for farmers and ranchers. Dairy and ethanol should continue to be profitable.

Yearly Average	2006	2007	2008	2009	2010	2011	2012 (est)
Wheat	$4.44	$5.94	$7.56	$4.82	$4.94	$7.23	$7.00
Fed Cattle	$86.00	$93.08	$92.92	$84.00	$96.20	$114.23	$125.00
Corn	$2.80	$3.94	$5.23	$3.99	$4.08	$6.77	$6.25
Cotton	$47.78	$47.96	$58.84	$67.89	$79.75	$135.84	$100.00
Milk	$13.85	$18.78	$17.56	$13.04	$15.40	$19.19	$18.00

Energy

Drilling in the eastern Panhandle is a huge benefit. The horizontal drilling is very efficient and producing a lot of oil. An over supply of natural gas all over the country is holding down prices and that will continue, but good liquids' prices may help many producers get around $6 for their gas. This sector should be strong for years to come.

Yearly Average	2006	2007	2008	2009	2010	2011	2012 (est)
Active Rigs	73	66	85	46	62	75	85
Posted Oil (Avg)	$62.61	$67.87	$95.28	$66.81	$75.19	$91.92	$94.00
Natural Gas (Avg)	$6.82	$7.03	$9.09	$4.82	$4.37	$4.04	$3.40

Travel

The new terminal at the airport benefitted travelers; but decreased capacity hurt our boardings (all 3 West Texas cities were about flat). Manageable gas prices and more rooms helped motel occupancy increase. Overall tourism should be up almost 4% in 2012.

Airline Boardings	2006	2007	2008	2009	2010	2011	2012 (est)
	445,066	457,956	453,291	406,630	408,053	411,154	415,200
	+0.04%	+2.90%	-1.00%	-10.30%	+0.35%	+0.76%	+1.00%

Motel Tax	2006	2007	2008	2009	2010	2011	2012 (est)
	3,937,584	4,342,995	4,345,307	4,477,531	4,488,774	4,819,508	4,836,376
	+9.80%	+10.30%	+0.05%	+3.00%	+0.30%	+6.70%	+3.50%

Bankruptcy Filings	2006	2007	2008	2009	2010	2011	2012 (est)
Annual Average	552	594	688	880	865	723	700

Amarillo Leading Indicators	2006	2007	2008	2009	2010	2011	2012 (est)
Annual Average	-3.1	1.4	-3.5	0.3	3.4	0.2	We do not forecast this. We let the numbers do that for us.