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Texas Economic Growth Slowing Down

DALLAS /PRNewswire/ — The Comerica Texas Economic Activity Index rose at a 0.9% annualized rate in the three months through January and was up 4.2% from a year ago.

Just two of the index’s nine components rose in the month. Employment was up a solid 40,000 on the month—but continuing claims for unemployment insurance also rose and were above 100,000 for the fifth consecutive month, painting a mixed picture of the state’s labor market. Seasonally-adjusted active oil drilling rigs fell for the fifth consecutive month—the pace of declines moderated for the second successive month.

Housing starts rose 4.7% in January but were still down roughly 21% from a year ago. Texas’s housing market is set to drag on the state’s economy in 2023 as surging mortgage interest rates and high prices sideline many would-be homebuyers. House prices declined for a seventh consecutive month in January, though the pace of declines is moderating. While further price declines are likely in the Lone Star State, they are likely to be shallower than in many other states due to the state’s strong economic fundamentals, such as strong population and employment growth.

After a lackluster start to 2022, the Texan economy grew rapidly in the second half of the year and expanded by 3.4% for the year, well above the national average of 2.1%. High inflation, high-interest rates, a softening national economy, and weak economies outside the US will be persistent headwinds to Texas’ economy, likely holding the state’s growth below trend in 2023.

The Comerica Texas Economic Activity Index is a monthly composite indicator of state economic activity. The Index provides a holistic advanced view of Texas’s economy, using economic data available about one quarter earlier than real GDP is released. The index is comprised of nine components: Nonfarm payroll employment, continuing claims for unemployment insurance, housing starts, house prices, industrial electricity sales, the Texas rotary rig count, foreign trade, hotel occupancy, and sales tax revenue. All data are seasonally adjusted with nominal values converted to constant dollar values as appropriate. The index is calculated from the three-month moving averages of its components to filter out month-to-month volatility in the index components. Values for a minority of components are projected from the prior month’s release due to the timing of data releases.

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