Economic Analysis

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June 2022

Amarillo’s economy continues its upward moves, with strength from job growth, construction, tourism and higher commodity prices.

Retail Sales are up 6.6%, which is down from the 11% YTD. The increase is probably less than the rate of inflation, so there is some slowing. New Vehicle Sales are down 27%, due to supply constraints, and Used Vehicles Sales are down 15%.

Tourism continues strong, with a 7% increase in the Motel bed tax and a 21% increase in Airline Boardings (back to levels before Covid).

Workers’ Employed are up 3,100 in the Employer’s Survey and 2,300 in the Household Survey (which has more part-time). Wages are shown down, but we see that as a reporting anomaly, since all businesses are reporting pressure on wages.

Housing Construction is at the highest level in a long time, with 82 starts up from 52 last month. YTD is 322 vs. 180 this time last year. However, interest rates on mortgages have jumped sharply, and the constricted supply is keeping the market going, but there may be demand fall offs in the future. The Median House Price is $240,000, up 8% from last year. Commercial construction is good, with a $9 million U-Haul building as the top project.

Energy continues to shine, with Oil up 68% and Gas up 123%. 8 drilling rigs are double the level last year, and royalty income is up across the Panhandle.

Commodity prices look good, but the Ag sector has been hurt by the drought, which cut wheat yields. Cattle prices are up 11%, but input costs are up even more due to corn being up 34%. Cotton prices are up 57% and Milk up 48%, keeping these two areas strong.

The Wall Street Journal reports that Amazon is rethinking their expansion strategy and may be cutting back on some of their warehouses. The opening of the Amarillo warehouse has been delayed twice, and is now scheduled for August (from press reports); but the national media is reporting that Amazon may take a different path in the future.

Inflation is in every discussion, and we have a further analysis in this report.

 June 2022

Current Month

Last Month

Last Year

 Sales Tax Collections

$7,845,459

$9,565,157

$7,360,264

 Sales Tax Collection-YTD

$49,009,117

$41,163,658

$44,057,785

 New Vehicle Sales

607

421

834

 Used Vehicle Sales

1,607

1,138

1,886

 Airline Boardings

33,425

27,922

27,681

 Hotel/Motel Receipt Tax

$664,916

$914,145

$619,995

 Population - Corporate Amarillo

199,747

199,747

191,514

 Employment - CLF

134,449

134,963

133,356

 Unemployment Rate

2.70%

2.50%

3.70%

 Total Workers Employed (Household Survey)

130,767

131,573

128,413

 Total Workers Employed (Employers Survey) 

124,400

124,275

121,290

 Average Weekly Wages

$936.50

$936.50

$1,013.50

 Gas

69,821

69,355

69,447

Interest Rates: 30 Year Mortgage Rates

6.250%

5.500%

3.375%

 Building Permits Dollar Amount

$54,681,116

$19,066,135

$53,711,505

 Year to Date Permits

$127,289,490

$72,601,466

$295,255,541

 Residential Starts

82

52

5

 Year To Date Starts

322

240

180

 Six Months Trailing

$186,834

$159,331

$296,212

 Median House Sold Price

$240,000

$247,500

$222,550

 Drilling Rigs In Panhandle

8

6

4

 Oil Price Per Barrel

$118.78

$114.20

$70.92

 Natural Gas

$7.50

$7.95

$3.35

 Wheat Per Bushel

$10.50

$11.78

$6.60

 Fed Cattle Per CWT

$134.00

$140.00

$120.00

 Corn Per Bushel

$7.68

$8.01

$5.72

 Cotton (Cents Per Pound)

$110.00

$102.00

$69.80

Milk

$24.50

$24.00

$16.50

Index*

246.00

239.88

197.12

*Base-100, January 1988

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. 

 

Inflation

Inflation is now on everyone’s mind, with most comments being that it is “too much”.

We are cursed with the double whammy of both types of inflation:

Cost Push
Demand Pull

The problems appear compounded because of the inability of fiscal and monetary leaders in Washington to recognize the causes of the problem. We have reported on inflation regularly over the last year; and policy makers have been on a different page.

Our inflationary pressures come from:

Fiscal Policy

A 9% drop in output was juiced by a 27% level of “stimulus”, (which appears to be three times what was needed).
Extra federal unemployment insurance cut people’s desire to work. Labor shortages exacerbated the Covid supply shortage.
Extended lockdown is still impacting the Supply Chain.
Energy policy designed to restrict supply caused prices to double.
In addition, the Federal Government ran deficits during a boom (even John Maynard Keynes would not approve). Too much money chasing too few goods.

Monetary Policy

Interest Rates were driven too low and stayed too long.
Quantitative Easing should have stopped 18 months ago when the economy had restarted; so currently excess liquidity is still juicing the economy.

The compound errors in both of these policies have combined to cause the current level of “too much” inflation.


Inflationary effects will be on:

Companies

Interest costs will more than double.
Borrowing will increase due to higher inventory prices, and inventory builds as supply chain improves.
Borrowing levels will increase due to higher inventory prices, and excess inventory builds anticipated price increases.

Individuals

Much higher risk of a recession.
In the 1970’s, lack of political will put off the day of reckoning, making inflation imbedded in household and corporate spending decisions. This extended the problem and made it worse.

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