INGHAM: Midland-Odessa Economies Continue to Set Records

“2018 was nothing short of a remarkable year of expansion and growth.”

Texas Insider Report: AUSTIN, Texas — “The Midland and Odessa area economies had a very good year,” said economist Karr Ingham, noting that the Midland-Odessa Regional Economic Index’s trend remained in expansion mode throughout 2018, with consumer spending and housing construction hitting record highs. Ingham, who prepares the Midland Economic Index for the Midland Development Corporation, recently presented his annual findings to the group.

The Midland Economic Index ended the 2018 year 17.6% higher than the end of 2017, while the Odessa Economic Index, prepared for the Odessa Development Corp., was up 16.2% in 2018.

The overall
Midland-Odessa Regional Economic Index, Ingham said, surpassed its previous
record high in April, and ended the year up 16.9% when compared to the end of
2017.

“2018 was nothing short of a remarkable year of expansion and growth in the Odessa metro area general economy, and that trend is solidly reflected in the Odessa Economic Index throughout the year,” said the economist.

The Midland-Odessa Regional Economic Index has now seen 26 consecutive months of increase, Ingham said, climbing 37% during that time.

Ingham, who also prepares the Texas Permian Basin Petroleum Index for the Texas Alliance of Energy Producers, said that index had recently snapped a two-year growth streak by declining in November and December 2018. Crude prices have recovered a significant portion of what was lost in November and December, noted Ingham, which could possibly lead to stabilizing activity and overall economic growth.

“Not
once in its history has even a one-month decline in the Petroleum Index not
signaled the onset of a sustained period of industry contraction, thereby
leading to general economic contraction in the Midland-Odessa area,”
Ingham said, while noting this may be the first time the general economy avoids
being impacted by the area’s petroleum industry.

Ingram said
he saw a minor slowing in the region’s year-over-year growth rate as the year
progressed — the Midland-Odessa Region’s 16.9% growth rate was down from a
2018 high of 21.6% in May – with fourth-quarter growth slowing to an annualized
rate of11.1%.

“That
likely has more to do with the fact that a 20%-plus rate of growth is probably
not sustainable over an indefinite period of time than it does the unexpected
decline in the regional oil and gas economy over the last two months of the
year,” Ingham said.

Almost
every component of the index finished 2018 with double-digit increases, with
the exception of airline boardings — which Ingham said were down 8.2% in
December compared to the previous December, but were up strongly for the year
— and existing home sales, which were down 1.7% in December from December 2017,
but up strongly for the year.

Retail Spending
reached record annual levels, climbing 35% in 2018 compared to 2017, which was
up 20% over 2016 levels. Spending also set a new quarterly record with a 27%
gain over the fourth quarter of 2017.

In Midland,
retail spending was up 32.2% in 2018 over 2017 levels, while fourth-quarter
spending was up 26.8% from the same quarter a year earlier.

Odessa
retail spending jumped 38% in 2018 over 2017, which was up 27% over 2016
levels. Fourth-quarter spending was up 27.2% compared to the final three months
of 2017.

Automotive
spending for the area in 2018 was up 32.4% over 2017, which was up 28% over
2016 spending. Automotive spending also set a quarterly record with a 28.3%
over the fourth quarter of 2017, which was about 40% above 2016 spending.

The other
pillar of the region’s economies – employment – also finished strong in 2018.
The unemployment rate dropped 28.3% to an average of just 2.5% in 2018, down
from 3.5% in 2017. The unemployment rate fell to 2.3% in the fourth quarter, down
some 14.9%, and the December unemployment rate of 2.3% was down 9.9% from 2.6%
the previous December.

Midland’s
unemployment rate fell 26% to average 2.2% in 2018, compared to 3% in 2017. The
Tall City’s unemployment rate averaged 2.1% in the fourth quarter, down 11.3%
from 2.4% a year earlier.

In Odessa,
the unemployment rate fell 30% to average 2.9% in 2018. In the fourth quarter,
it dropped 18.1% to average 2.6%.

Midland-Odessa
employment rose 6.7% to average 177,835 people employed for the year, up from
166,600 in 2017. Fourth-quarter employment rose 4.5% to average 180,435, up
from 172,665 in the fourth quarter of 2017 and the December average of 180,900
was up 4.3% from 173,400 the previous December.

Midland’s
employment rose to an average 101,965 in 2018, up 9.2% from 93,415 in 2017. In
the fourth quarter, employment averaged 103,900, up 7% from 97,065 in the
fourth quarter of 2017.

In Odessa,
2018 employment averaged 75,867, up 3.7% from 73,185 in 2017. Fourth-quarter
employment averaged 76,535, up 1.2% from 75,600 a year earlier.

Ingham said
he believes Odessa’s employment estimates are “almost certainly
dramatically understated, especially in the latter half of the year.” He
predicted that when the Texas Workforce Commission issues its revised
employment data next month, Odessa will see a significant upgrade.

Construction
activity in 2018 continued what Ingham referred to as a rapid recovery, with
the total of all building permits rising 37.6% to $963.2 million. That compares
to $699.9 million in 2017. It was the third highest total in the history of the
index, behind 2013 and 2014, and fourth-quarter values were up 41% over the
fourth quarter of 2017. Ingham said the permit total for December 2017 was the
lowest since December 2010.

In Midland,
building permit totals for 2018 totaled $571.6 million, up 64.2% from $348.2
million in 2017. Odessa permit totals rose 11.3% to $391.5 million in 2018, up
from $351.7 million in 2017.

New housing
set records across the board, Ingham said, “and it wasn’t even
close.” The 1,778 new housing permits exceeded 2017’s total of 1,330 by
nearly 450 permits, or 33.7%.

He also noted
that fourth-quarter and 2018 sales totals set records, breaking those set the
previous year. In the fourth quarter alone, 1,104 homes were sold, and for 2018
there were 4,521 homes sold, exceeding 4,500 for the first time ever.

The average
sales price for 2018 was $282,925, up 8.9% from $259,771 in 2017.

Odessa’s
housing market was significantly stronger as well. In the fourth quarter, 430
homes were sold, up 23.9% from 347 a year earlier. For the year, 1,713 homes
were sold, up 29.2% from 1,326 in 2017.

December’s
average sales price was $221,460, up 6.1% from $208,649 last December.

In 2018 the
area’s Hotel & Motel Taxes shattered previous records set in 2014.
Year-to-date taxes collected were $283.3 million, up 87.4% from $151 million in
2017.

In Midland,
hotel-motel revenue rose 88.6% to $158 million, up $87.3 million from a year
earlier.

Odessa
hotel-motel revenue followed the trend, rising 85.9% to $125.2 million from
$67.4 million in 2017.

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Source: Texas Politics

INGHAM: Midland-Odessa Economies Continue to Set Records

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