Press

United Commercial Realty

Texas still nation’s bright spot

Despite continued job losses and warning signs of slower economic growth, Texas can expect a slightly smoother ride through the recession than the rest of the country, a bank economist said Thursday.

Nathaniel Karp, chief economist for BBVA Compass, the U.S. banking arm of Spanish financial giant Banco Bilbao Vizcaya Argentaria SA, said during a Webcast briefing that the Texas economy is expected to grow by about 1.2 percent in 2009 after slowing to 2 percent growth in 2008.

Overall, the economic effects of Hurricane Ike knocked about 1 percent off the state’s gross domestic product in 2008, he said, but noted that reconstruction efforts will help stabilize Texas’ job outlook in 2009.

Overall, BBVA economists predict that total job losses in the U.S. between 2008 and 2010 will range from 3 million to 4 million, but some of those job losses could be mitigated by the stimulus package being put forth by President Obama.
Another bright spot, Karp said, is the state’s continued growth in exports above the national average, particularly to relatively stable countries such as its geographic neighbors Canada and Mexico. Texas’ exports to China are also critical, growing at an impressive annual rate of 7 percent.

According to BBVA’s fourth-quarter 2008 economic outlook, personal income in Texas increased 6.7 percent last year, which helped to sustain household consumption and limited the economic impact of the housing market meltdown. BBVA’s estimates show that personal income in the state will increase by 4.8 percent in 2009, compared to 2.5 percent nationwide.

Texas home sales are projected to increase by 5.6 percent this year, compared to an average decline of 12.4 percent across the country.

Karp noted that there are definite risks to growth in Texas, particularly related to the potential effect of lower energy commodity prices and the ripple effect from even worse economic conditions elsewhere in the country if the recession is deeper or longer than predicted.

A 10 percent decline in oil prices translates into a 0.1 percent decline in the state’s GDP, he said. BBVA predicts an average oil price of $46 a barrel in 2009.

Although Karp estimates total U.S. gross domestic product could decline by 1.8 percent in 2009, he expects that decline could ease to less than 1 percent, depending on the timing and effect of the stimulus package.