2023 Economic Forecast
2022 had it all: Growth, then inflation, then flattening; booming energy, drought, then second half slowdown, plus labor and supply shortages. Job growth slowed and retail sales growth dropped from 13% to 4%. Construction was steady.
Areas of Economic Strength
Areas of Economic Weakness
Loosening labor and supply chains will boost businesses. Price increases will mask slowing retail sales. Government entities are still flush with stimulus money. If drought continues, agri-business will continue to suffer. Energy should stay strong, boosting our entire area. Inflation, tight money, and higher labor costs will combine to hurt businesses and consumers by the latter half of 2023.
Outlook for Specific Sectors
House sales were booming the first quarter and slowed marketably by Fall. Early 2022 material and labor shortages eased and sales prices were up 8%. Meanwhile, pent-up demand left housing starts above the levels of the past decade. Commercial construction remains good, but total permits may be in the lower range of the past decade. (2022’s drop was no Amazon like 2021) Over 750 septic permits in Potter and Randall County pushed our total housing starts to about 1,600 new homes.
*Roofing & Remodels were combined June 2022
Stimulus money boosted sales in the first half, then inflation took its toll. Slower job growth in Amarillo will be partially offset by higher wages in 2023. Inflation will mask declines in units sold. Higher energy income may ameliorate lower stock market returns and less ag income from our area.
Consumer Price Index (Amarillo)
Amarillo inflation was difficult to measure, as some prices jumped due to shortages, then flattened or dropped. Commodities were up 50%, then down to levels about 20% higher than one year ago. Groceries were up 13% (with a range of 5% to 100% for some items). 2023 inflation may slow to 6%; however that is still triple the level of the last decade (and represents a tax on everyone).
Tight job market and Amazon’s opening pushed up wages. Many businesses had staff shortages. Major employers stayed flat, but AIG dropped 500 workers. Construction has held steady and should continue in 2023. Major employers (Pantex, Bell, Tyson, Government, and energy related) should maintain current staffing levels.
Drought cut yields just as prices rose throughout the first half. A poor wheat crop and higher irrigation costs hurt income. Much of our cotton was disastered for insurance. Midsummer rains helped Fall crops. Cattle prices rose, but cow and calf operators had to thin herds due to the drought and missed much of the upside. Dairy had a better year than expected. Lack of moisture will hurt farm incomes. Feedyards are moderately profitable, and dairy should have another good year overcoming high input costs. Farm land prices continue to move higher.
Oil and gas prices peaked in the summer, and then fell back to last winter’s levels. Drilling activity more than doubled. 2023 forecasts rising oil prices, while natural gas fluctuates between $4 and $7. All this combines to support our economy, but higher prices will spur inflation.
Tourism continued to prop up our economy, as motel occupancy stayed high and airline boardings surged. Motels slipped some in the last half, but higher room rates kept the motel tax increasing. 2023 should continue holding onto the increases of this year, even though motel occupancy percentages are under pressure. More airline nonstops will boost boardings.
Stimulus money buffeted consumers for the last two years. Inflation pressures will fall on consumers, leading to increases in this category
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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