Houston Economy Still Growing and Broadening

  • The Houston metro area continues to be a major engine of growth for the U.S. economy. Job creation over the 12 months  ending in December was very strong, with payroll employment up 3.1 percent compared with the U.S. average of 1.6 percent. Houston’s unemployment rate, at 6.0 percent in December, is well below the national average of 7.8 percent for that month. Recent increases in federal taxes will be a drag on consumer spending in Houston, but strong labor and property markets will keep consumers engaged. Further fiscal tightening is expected in the form of cuts to federal defense and non-defense discretionary spending.
  • Increasing construction activity is broadening Houston’s economy. Total construction contracts were up 19.2 percent in the Houston area in 2012. Nearly all the gain was in residential construction. House prices have been firming through mid-year 2012, and are expected to continue to gain as home sales increase. According to the FHFA purchase-only house price index, Houston house prices on purchase homes (excluding refis) were up 10.0 percent in the third quarter of 2012 from a year earlier, the first double-digit increase since late 1999. Home sales in 2012 for the Houston area were the fourth highest ever. Inventories remain lean in early 2013.
  • The price for West Texas intermediate crude oil increased from mid-December through the end of January, recently stabilizing near $97 per barrel. The expansion of the Seaway pipeline which transports crude oil from Cushing, Oklahoma to Texas Gulf Coast refiners narrowed the spread between WTI and Brent and will result in lower prices at the gasoline pump in the months ahead. The oil rig count in Texas has eased slightly off its mid-2012 highs while the gas rig count has stabilized after sliding through 2012.
  • The Houston Purchasing Managers Index showed ongoing strength in area manufacturing through January. At 55.8 in January, the Houston PMI was well above the neutral 50 mark, significantly better than the comparable ISM Manufacturing Index for the U.S. Area manufacturing conditions are expected to remain favorable through 2013, supported by strong energy markets and an ongoing U.S. expansion.

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Click here for the complete Houston MSA Regional Economic Update: Houston 2013Q1.

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