amarillo economic forecast for 2009

2008 Recap

Amarillo fared better than the rest of the US in 2008 with job growth and retail sales both healthy, although November and December were slower than the first three quarters. Housing prices held steady.  Commodity prices surged in the first half boosting incomes. Construction held up. Cattle had a very poor year and farm incomes were down.

Areas of Economic Strength

Continued job growth
Fairly steady retail sales growth
High commodity prices through July
Good commercial construction
Housing prices held flat

Areas of Economic Weakness

Rapidly falling commodity prices in the last half
Bad news from Wall Street
Slowing housing starts
Index of Leading Indicators turned negative in July through year end
Moisture at wrong times of the year lead to lower crop yields
Feedlot cattle lost money most months

2009 Forecast

December declines may continue into the first 6 months as job growth stalls and negative attitudes hurt retail sales.  Construction may drop, but lower prices plus lower mortgage rates will slow any decline in home prices. Commodities should flatten out at these lower levels and improve in the 2nd half. The drop in Wall Street and the national credit problems will delay new projects, but Amarillo employment should remain steady among both national and local employers.

Outlook for specific sectors

Real Estate

New construction slowed as housing starts dropped 23% while commercial was up slightly, helped by Bell’s new building.  Existing homes have stayed on the market a little longer, but prices are probably flat compared with twelve months ago. 2009 may see about 5% price weakness but lower mortgage rates and steady employment should keep a floor under prices.  The home refinance boom should last two months.

Building Permits	2004	2005	2006	2007	2008	2009(est)
Housing Starts	725	829	677	663	516	460
Remodels	6,951	3,432	1,901	1,857	1,536	1,900
Roof Permits	5,476	2,536	970	996	819	1,000
Comm. Units	586	726	594	474	342	300
Total Value (mil)	$358	$455	$387	$409	$394	$350

Retail Sales

Personal income will get a boost from lower gasoline prices, low inflation, and mortgage refinancing. If job levels hold, sales should stay flat.  Auto sales will drag the first half, but if they turn up later we may see growth later in the year.  Lower inflation will make for a smaller percentage increase.

Sales Tax Collections
2004	$48,155,445	up 8.0%
2005	$50,524,792	up 4.9%
2006	$53,770,280	up 6.4%
2007	$56,076,026	up 4.3%
2008	$59,442,045	up 6.0%
2009 (est)	$61,046,980	up 2.7%

Consumer Price Index (Amarillo)

Lower gasoline costs, steady grocery prices, drops in utility costs will pull our index below the national level.

C.P.I. Increases:	Amarillo	National
2003	2.2%	2.3%
2004	5.1%	2.7%
2005	3.8%	3.4%
2006	4.6%	3.2%
2007	4.0%	2.8%
2008	6.6%	4.2%
2009 (est)	2.0%	2.7%

Employment

Our major employers and government should stay near current levels. Some declines will affect medium and small businesses, so we expect this to stay flat with December. Watch the monthly reports for a predictor of Amarillo’s economy.

(Average)	Household Survey	Employers Survey	Average Unemployment
2004	116,325	102,800	3.3%
2005	122,675	109,900	3.7%
2006	127,717	112,500	3.8%
2007	126,583	112,500	3.3%
2008	129,525	113,025	3.5%
2009 (est)	130,000	114,000	4.0%

Agri-Business

Farm incomes were hurt by lower prices and lower crop yields. Cattle had a poor year, one of the worst in decades. 2009 should see slightly lower levels of farm income but improving cattle prospects by year end.

(Average For Year)	2005	2006	2007	Peak	Year-End 2008	2009 (est)
Wheat	$3.20	$4.44	$5.94	$9.79	$4.83	$4.80
Fed Cattle	$88.00	$86.00	$93.08	$101.00	$86.00	$90.00
Corn	$2.20	$2.80	$3.94	$7.29	$3.96	$4.20
Cotton	$47.78	$47.96	$48.95	$64.71	$40.27	$40.00

Energy

Prices fell off a cliff (note peak versus year end) as the speculative bubble burst. We expect oil prices climb by fall, but natural gas is still burdened by over supply. Rig utilizations and cost to drill will drop. Utility bills will decline. Some natural gas producers are getting even lower prices due to pipeline over supply.

Yearly Average	2005	2006	2007	Peak	Year-End 2008	2009 (est)
Active Rigs	64	73	66	101	67	56
Posted Oil (Avg)	$52.43	$62.61	$67.87	$137.52	$40.71	$55.00
Natural Gas (Avg)	$9.02	$6.82	$7.03	$12.59	$5.89	$5.30

Travel

Less available seats and fewer business travelers may hurt airline boardings. Lower gasoline prices will offset part of the decline in motel occupancy due to the recession.

Airline Boardings	2004	2005	2006	2008	2008	2009 (est)
	415,066	444,886	445,068	457,960	450,954	437,425
	+7.9%	+7.2%	+0.0%	+2.9%	-1.6%	-3.0%

Motel Tax	2004	2005	2006	2008	2008	2009 (est)
	3,427,492	3,586,670	3,937,584	4,342,995	4,345,307	4,304,000
	+2.5%	+4.6%	+9.8%	+10.3%	+.05%	-1.0%

Bankruptcy Filings	2004	2005	2006	2008	2008	2009 (est)
Active Rigs	1,555	2,006	552	594	688	800

Amarillo Leading Indicators	2004	2005	2006	2008	2008	2009 (est)
Annual Average	5.6	4.5	-3.1	1.4	-3.5	We do not forecast this. We let the numbers do that for us.