2022 Economic Forecast
2021 was not a good year to be in the forecasting business. Amarillo’s economy changed quickly, and recovery exceeded most forecasts. Stimulus money propped up the consumer and public entities, while inflation ate away at disposable income. Mid-year rains were helpful, and rising commodity prices benefitted the entire Panhandle. Local retail sales, motel occupancy and employment levels showed strong gains, as did supply chain problems.
Areas of Economic Strength
Areas of Economic Weakness
Amarillo’s economy has been strong, with good momentum going into 2022. Employment levels will stay high, even though the lack of workers continues to be a problem. Building permits will return to normal levels (after 2021’s boost from the Amazon Warehouse). Supply chain disruptions are forecast to continue through mid-year. Prices should increase in commodities, real estate, construction and retail; all putting a strain on consumers, as stimulus checks run out.
Outlook for Specific Sectors
Residential Real Estate had a fine year, as prices increased 20%, while supply of homes on the market dropped. Low interest rates and strong disposable income drove housing upward. Commercial construction was very strong, with a big boost from the Amazon warehouse. Both categories should continue in 2022, with supply of housing staying tight until mortgage rates increase. Commercial construction will drop back to normal levels, but most contractors will stay busy during the year. Housing starts are steady, but Amarillo’s numbers do not include the large number of starts outside the City and in Bushland and Canyon. Construction costs are up 25% overall, with some items up 100%. 2022 prices may increase another 10%.
*Roofing & Remodels were combined June 2021
Retail Sales jumped to record levels due to stimulus money and consumers having more income, (as they cut out travel). Also, available goods decreased and prices increased. Part of the gain is illusionary due to inflation. 2022 should continue these trends, as disposable incomes stay strong and higher prices make total sales inflated, while actual number of goods grow slower (on a real basis) and supply chain disruptions continue through mid-year. Spring IRS refunds will be smaller because six months of Federal Child Credits were paid monthly instead of within the refund (as in the past).
Consumer Price Index (Amarillo)
The CPI was the biggest miss. We have been warning about inflation for the past three quarters and finally our leaders in Washington discovered it in the last quarter. Unfortunately, this is going to be a major problem in 2022, as cost-push from higher input prices, higher transportation, and shortages combine with demand-pull inflation from stimulus money and higher wages sloshing through the economy.
Amarillo employment rebounded sharply, as most businesses reopened ahead of other cities. Shortage of workers is the main problem for all employers; however, our employment numbers should increase, and average wages should jump also. Amazon Warehouse continues to push up wages at all lower paid jobs. December’s unemployment rate was 3.1%, the lowest in Texas. Our actual unemployment includes workers who have left the labor force.
Agri-business had a wonderful year due to higher prices and good moisture. Commodities were up sharply, with good crop yields. Dairy was profitable, although it declined during mid-year, but is back to a profitable level. Cattle made some profit at the producer level, while packers made record profits. Feed costs are up about 30%. 2022 will continue at profitable levels, with the amounts determined by moisture availability.
Energy had a strong year, with prices rising gradually throughout the year. In the Fall there was a sharp jump in the price of oil and natural gas. Both have settled down 15% from their highs, but are still at profitable levels. This should continue through 2022, with a continued increase in drilling activity.
Airline Boardings did not recover as fast as other sectors of Amarillo’s economy. There should be a gradual increase, especially with some of the new schedules. Higher fares and lack of flights will keep numbers from growing. Motel occupancy is a true bright spot, with a boom in higher revenue occupancy (while motels were able to cut costs of housekeeping and other services) and revenue per room increasing profits.
Bankruptcies were up slightly, even though the job market has been strong. They are trending in a range for the last seven years.
This document was prepared by Amarillo National Bank on behalf of itself for distribution in Amarillo, Texas and is provided for informational purposes only. The information, opinions, estimates and forecasts contained herein relate to specific dates and are subject to change without notice due to market and other fluctuations. The information, opinions, estimates and forecasts contained in this document have been gathered or obtained from public sources believed to be accurate, complete and/or correct. The information and observations contained herein are solely statements of opinion and not statements of fact or recommendations to purchase, sell or make any other investment decisions.
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