2020 Economic Forecast

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2019 Recap

• Slower job growth pulled down retail sales growth, wages and construction.
• Housing starts were down 20% and total Building Permits were down 30%.
• Commodities were mixed, but feedyards and dairies ended the year profitable.

Areas of Economic Strength

• Major employers were stable.
• Ballpark helped boost tourism.
• Good moisture in the 2nd half of the year.
• Spike in roofing permits.

Areas of Economic Weakness

• Less job growth.
• Construction slowed in housing and commercial.
• Retail sales were weak.
• Oil & Gas activity and incomes dropped.
• Retail sales grew only 2.17%, as internet commerce continues to hurt.

2020 Forecast

• Higher wages and less job losses will buoy retail sales.
• Tight housing market, but slow job growth means same amount of housing starts.
• Feedyards and Dairies will have good years, as strong prices equate to profits.
• Oil and Gas will remain depressed due to supply glut.
• Trade Agreements and Election year will create volatility in commodity markets.
• Steady increases in Tourism.

Outlook for Specific Sectors

Real Estate

In 2019 Home prices held as mortgage rates dropped with the Fed interest rate cuts. New starts declined 14% mirroring slower job growth. A jump in roof permits was reflective of 2 hail storms. Commercial permits were lower and jobs smaller. Permit dollars down 30%. In 2020, we see a tighter housing market leading to lower inventories and slightly higher median sales prices. Commercial activity should be slightly higher.

Retail Sales

Disposable incomes were helped by steady wages, tax cuts, stock market gains and higher farm incomes. Used car sales were up 10% and New Car sales were up 15% in 2019. 2020 should see some wage inflation, but the price of goods should stay low. We expect a 2.8% increase in retail sales, which will be lower than inflation.

Car sales should be flat with 2019.

Consumer Price Index (Amarillo)

Amarillo’s prices were up 2%. Higher gas prices were offset by lower Health Costs and Utilities. Area inflation will outpace national levels in 2020 due to wage increases in a tight job market.

Employment

Overall employment saw small job declines (300 in Household Survey; 700 in Employers). The decline in the Household Survey may be less people working 2 part-time jobs. Overall wages dropped 3.7%, as some high paid jobs were lost. Major employers should stay steady in 2020. We expect an overall increase of 1,500 – 2,000 jobs in Amarillo for 2020, with a continued tight job market.

Agri-Business

2019 was a tough year for grain and cotton farmers. Unsteady and untimely rains hurt cotton planting and a lot of farmers shifted to corn and sorghum. The only income here came from crop insurance due to trade wars and bad weather.

Cattle prices were steady in 2019. African Swine Flu helped all protein markets. Feedyards and packers expect higher margins in 2020 due to strong demand from good economy. Cow herd growth and high feedyard inventories should limit upside growth. Dairies had a good year with improving prices and lower input costs.

In 2020, area agriculture will continue to rely on moisture. We expect lower wheat prices and level corn and cotton prices. Cattle prices will be between $110 and $120. Milk prices will be $16.40.

Energy

2019 saw production and income decline in the Panhandle. Lower gas prices ($2.33) due to a giant glut in supply in the Permian forced drillers to nearly stop activity. There were 20 rigs running at the start of 2019. Today there are 6. In the Permian, Producers were paying to have their gas shipped out due to lack of pipelines. Natural gas prices should stay around $2 and Oil should be around $60.

Travel

Travel continues to grow with the Downtown hotels and good I-40 traffic. Airline Boardings are up with more flights out of Amarillo. We think both Hotel/Motel Tax Collections and Boardings will be up in 2020.

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.