Economic Forecast

2017 Recap

  • Steady year for Amarillo’s economy due to job growth and construction
  • Retail, auto and home sales slowed in 2nd half of year
  • Stable Commodity prices helped cattle regain footing and fall crops

Areas of Economic Strength

  • Job increases of 3,000 from 2016 with Manufacturing and Utilities leading the way
  • 2nd best year in history for cattle production and packing
  • Cotton had its best year in a while due to high yields and prices
  • Drilling returned to the Panhandle as Oil went over $50 and Natural Gas stayed over $3

Areas of Economic Weakness

  • Lower retail sales due to online competition
  • Auto sales had a terrible end to the year but used prices are strong due to Harvey
  • Housing slowed a lot in the last quarter as interest rates went higher
  • Dairies saw softening margins due to oversupply in the market
  • End of year drought will put pressure on winter wheat and cattle

2018 Forecast

  • Confidence from Tax Reform should bring more consumer spending and capital investment
  • Slowdown in construction as retail is slightly overbuilt and Amarillo population not growing
  • Steady energy prices will keep area drilling going
  • Profitability will be harder to achieve for area feedyards and dairies

Outlook for Specific Sectors

Real Estate

Housing starts were down 3% due to higher interest rates and a slowdown in sales.  Over the year, the average was 5 less homes sold per month than in 2016. Again, most of the selling activity happened in houses priced below $300,000.  2018 will be a slower year for housing due to higher interest rates.  Commercial construction was bolstered by Medical buildings, downtown development and retail space.

Building Permits

2011

2012

2013

2014

2015

2016

2017

2018(est) 

Housing Starts

553

527

484

454

406

400

450

 450

Remodels

1,945

2,037

1,536

1,752

1,506

1,600

1,400

 1,250

Roof Permits

1,044

1,141

17,055

6,304

2,260

1,000

1,000

 1,200

Comm. Units

508

521

371

512

378

380

390

500 

Total Value (mil)

$276

$346

$480

$589

$485

$450

$445

 $600

Retail Sales

For the second year in a row, Amarillo saw lower retail sales even as jobs grew and inflation stayed in check.  With individuals sending less of their paycheck to the Federal Government, spending should increase. Car dealers had a bad last part of 2017.  We expect car sales to be mixed since used car prices are still high.  New car sales could increase due to tax reform. Gas prices increased in 2017, and we will continue to watch Interstate traffic and our Medical community to bring out-of-town spending..

Year

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Sales Tax Collection

 

$61,805,523

$65,385,227

$70,744,051

$71,801,582

$74,423,000

$75,950,000

$76,600,000

 $75,000,000

up 8.7%

up 5.8%

up 8.2%

up 1.5%

up 2.9%

up 2.0%

up 2.9%

up 1.1% 

Consumer Price Index (Amarillo)

Not a lot of price increases in 2017, even in groceries and health care. Inflation will be a wild card in 2018, as the national economy is strong, but technology keeps production costs low.

CPI Increases 

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Amarillo

3.10% 1.50% 1.48% 2.50% 0.58% 1.00% 2.80% 2.90%

National

3.2%

1.7%

 1.7%

 2.2%

 0.5%

2.3%

2.80%

 3.40%

Employment

Steady job gains in 2017 helped bolster the entire region. Gains in manufacturing, oil and gas related jobs, and utilities brought the kind of job growth that is good for the long term. The Household Survey shows an increase of 1,800 jobs in 2017, while the Employer’s Survey shows an increase of 2,600.  A slowdown in residential construction in 2018 could hurt jobs.

12 Month Average 

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Household Survey

126,833

128,125

 129,385

130,800

125,741

124,000

128,000

130,800 

Employers Survey

112,200

114,490

115,750

117,000

 116,975

117,000

121,000

124,800 

Average Unemployment

5.7%

4.1%

4.7%

4.5%

4.0%

3.9%

3.2%

 3.0%

Agri-Business

Cattle prices improved in 2017, since 2016 was the worst year ever.  Beef demand was strong last year and area feedyards benefited from higher prices.  Area packers had record years.  Dairies slowed down a little in 2017, as prices lowered due to oversupply. Cotton dominated local farming and the usual amount of corn was planted for rotation cycles.  Timely moisture and dryness helped yields, but a fungus hit area corn.  We expect planting acreage in 2018 to resemble 2017.

Yearly Average 

2011

2012

2013

2014

2015

2016

2017

 2018 (est)

Wheat

$7.23

$6.94

$7.10

$6.80

$4.90

$4.60

$4.20

 $3.80

Fed Cattle

$114.23

$122.75

$125.67

$130.00

$148.00

$140.00

$115.00

 $130.00

Corn

$6.77

$7.03

$6.41

$4.9

$4.04

$3.60

$3.70

 $3.50

Cotton

$135.84

$85.40

$79.41

$78.00

$60.96

$65.00

$68.00

 $69.00

Milk

$19.19

$17.49

$18.42

$19.00

$15.75

$15.50

$16.00

 $15.00

Energy

Natural Gas prices stayed around $3 for the year, but a fire at an area collection terminal in September put a halt to production, and with limited buyers, area producers were later forced to sell their gas at a discount.  As the gathering station comes back online in 2018, we expect a stronger year for Natural Gas.  Oil rebounded to close to $60. It’s highest level since 2014. We see $3 gas and $50 oil for 2018.

Yearly Average

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Active Rigs

75

69

71

72

26

14

13

19 

Posted Oil (Avg)

$91.92

$84.45

$94.48

$93

$46.04

$40.00

$50.00

 $50.00

Natural Gas (Avg)

$4.04

$2.48

$3.63

$4.10

$2.74

$1.95

$3.40

 $3.00

Travel

Airline Boardings were flat with 2016 (and 2015 for that matter). New routes in 2018 will help this number.  Also, Hotel/Motel tax collections were flat with 2016, even as we saw a higher inventory of rooms in 2017.  We will watch the occupancy rates of the downtown hotels and see if cannibalization occurs.

Year

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Airline Boardings

411,154

398,968

380,077

372,205

343,996

338,000

340,000

345,000 

+.76%

-2.96%

-4.73%

-2.07%

-7.50%

-1.70%

+.81%

+.67% 

Year

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Motel Tax

 

4,819,508

5,002,181

5,862,651

6,156,822

5,847,091

5,900,000

7,000,000

 6,800,000

+7.37%

+3.79%

+17.20%

+5.02%

-5.00%

-.90%

+2.60%

+2.86% 

Bankruptcies were up 14%, even with the stable job market.  We expect them to be under 400 for 2018.

Bankruptcy Filings

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Annual Average

723

625

439

430

327

377

400

390 

Amarillo Leading Indicators

2011

2012

2013

2014

2015

2016

2017

2018 (est) 

Annual Average

.20

1.60

1.75

-.60

-7.40%

1.40%.

-1.4%

 We don't forecast this. We let the numbers do that for us

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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