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Economic Forecast

2015 Recap

  • Slower growth caused by job losses and oil bust.
  • Construction stayed flat.
  • Good moisture improved crop yields in the face of lower prices.

Areas of Economic Strength

  • Good rains well-spaced out
  • Agricultural profits in the 1st half of the year
  • Commercial construction offsets slight drop in residential

Areas of Economic Weakness

  • Drops in levels for manufacturing and oil employment
  • Steep decline in prices for oil and natural gas
  • Lower commodity and cattle prices in the last 6 months

2016 Forecast

  • Lower oil prices will impact retail sales and economic activity
  • Lower gasoline prices will help consumers keep CPI flat
  • Cattle and crop prices will not go much lower due to losses in these sectors
  • Real Estate will be steady

OUTLOOK FOR SPECIFIC SECTORS

Real Estate

Housing starts are off 10% due to less people working and tighter federal regulations. Apartments continue strong. Hail activity is slowing after 2-1/2 strong years. Commercial activity picked up at year end as did existing home sales. We should stay near these levels for housing starts due to low mortgage rates. Commercial construction will be boosted by government projects. Higher construction costs are felt in all projects.

Building Permits20092010201120122013201420152016 (est)
Housing Starts 549 507 553 527 484 454 406 400
Remodels 1,668 2,082 1,945 2,037 1,536 1,752 1,506 1600
Roof Permits 1,015 1,305 1,044 1,141 17,055 6,304 2,260 1000
Comm. Units 355 465 508 521 371 512 378 380
Total Value (mil) $384 $384 $276 $346 $480 $589 $485 450

Retail Sales

Retail sales have been basically soft for two years after strong growth from 2011 to 2013. We should probably add a 1% increase to the growth due to sales on the internet, but this does not benefit local businesses. Lower gas and grocery prices will help disposable income prop up retail sales.

Sales Tax Collections
2009 $56,514,271 down 4.9%
2010 $56,863,740  up .1%
2011 $61,805,523 up 8.7%
2012 $65,385,227 up 5.8%
2013  $70,744,051 up 8.2%
2014 $71,801,582 up  1.5%
2015 $74,423,000 up 2.9%
2016 (est) 75,950,000  up 2.0%

Consumer Price Index (Amarillo)

CPI has been at abnormally low levels and this should continue with cheap gasoline and expected deflation at the grocery stores.

C.P.I. Increases:AmarilloNational
2009 .30% -.4%
2010 .40% 1.6%
2011 3.10% 3.2%
2012 1.50% 1.7%
2013 1.48% 1.7%
2014 2.50% 2.2%
2015 0.58% 0.5%
2016 (est) 1.0%  2.3% 

Employment

The Employers Survey has shown small growth, but it is in lower paying jobs. Manufacturing is down 500 jobs and oil is down 100. These are the foundation of our local job market and will pull service jobs down in the long run. Motels and restaurants were the main area of growth last year.

The major employers should flatten out employment levels while oil will continue to decrease. As construction stays moderate, we expect “workers employed” in both our surveys to be flat in the coming year. Any real up-tick would have to come from our major employers.

(12 Month Average)Household SurveyEmployers SurveyAverage Unemployment
2009 124,333 111,882 4.9% 
2010 125,817 110,667 5.6%
2011 126,833  112,200 5.7%
2012 128,125 114,490 4.1%
2013 129,385 115,750 4.7%
2014 130,800 117,000 4.5%
2015 125,741 116,975 4.0%
2016 124,000 117,000 3.9%

 

Agri-Business

The benefit of well-spaced, abundant rains was offset by lower commodity prices. Farm income was about flat even though there were good yields in wheat and corn. Cotton was down some. The cattle market broke in the fall twice, and cattle prices were readjusting downward. At grocery stores all proteins are cheaper; and we expect beef prices to follow other proteins down beginning in March. This should put a floor under the sharp drop in cattle prices. Farm commodities have been hurt by the stronger dollar as export demand dried up. In 2016, we should see a bottoming of these prices even though demand is not picking up very much.

Yearly Average20092010201120122013 20142015 
Wheat   $4.82   $4.94 $7.23 $6.94  $7.10 $6.80 $4.90 $4.60
Fed Cattle   $84.00   $96.20 $114.23 $122.75   $125.67 $130.00 $148.00 $140.00
Corn   $3.99    $4.08   $6.77        $7.03   $6.41        $4.9   $4.04 $3.60
Cotton   $67.89   $79.75      $135.84      $85.40   $79.41      $78.00   $60.96 $65.00
Milk   $13.04        $15.40     $19.19    $17.49     $18.42        $19.00   $15.75 $15.50

Energy

The energy price bust is hitting us hard with declines almost equal to the 1980’s drops (as a percentage). Since the oil and gas price declines have been caused by excess supply, we think it will take longer to work this out. In the 1980’s, there was an over-supply of 10% of production and it took 13 years for prices to recover. A current over-production is about 2% worldwide for oil and about 5% for natural gas. Thus these prices should come back faster than the 1980’s, but 2016 may not be the year that they climb back to moderate levels.

Yearly Average20092010201120122013 201420152016 (est)
Active Rigs 46 62 75 69 71 72 26 14
Posted Oil (Avg) $66.81 $75.19 $91.92 $84.45 $94.48 $93 $46.04 $40.00
Natural Gas (Avg) $4.82 $4.37 $4.04 $2.48 $3.63 $4.10 $2.74 $1.95

Travel

Airline Boardings continued their 5 year drop in Amarillo, as Southwest cut flights and increased fares. We are down 15% some months with the yearly average being down 7.5%, but off 20% from the high from 2011. These levels should stop declining, but high load factors will keep a lid on any growth. Motel Taxes are down slightly from the rapid growth of the past 3 years. When those new Motel’s come on line, the recent firming in prices may erode. Their total income (or Motel Tax revenue) will probably be flat.

Airline Boardings20092010201120122013 201420152016 (est)
   406,630  408,053  411,154  398,968  380,077  372,205 343,996 338,000
  -10.29% +.35% +.76% -2.96% -4.73% -2.07% -7.50% -1.70%
Motel Tax20092010201120122013 20142015 
    4,477,531   4,488,774   4,819,508   5,002,181   5,862,651   6,156,822   5,847,091 5,900,000
  +3.04%  + .25% +7.37% +3.79% +17.20% +5.02% -5.00% -.90%

Bankruptcy has continued to decline and we reached levels down 60% from 2010. With the weakness in the oil patch and less job growth, filings will probably be up 15%..

Bankruptcy Filings20092010201120122013201420152016 (est)
Annual Average 880 865 723 625 439 430 327 377

Amarillo’s Leading Index has been negative most of 2015, forecasting the slowdown we are now experiencing.

Amarillo Leading Indicators20092010201120122013201420152016
Annual Average .30 3.40 .20 1.60 1.75 -.60 -7.40% We do not 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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