Texas Index Grew Slower in August
The Comerica Texas Economic Activity Index rose at a 1.5% annualized rate in the three months through August. The index has slowed sharply after robust increases earlier in the year. The index was up 7.6% from a year-ago in August.
Four of the index’s nine components improved in the month. Employment continues to rise in Texas and the number of employed is well above pre-pandemic levels. Active oil-drilling rigs rose again as energy prices stayed high. The energy sector is likely to provide a strong tailwind to Texas’s economy.
After adjusting for the normal seasonal increase in the summer, housing starts fell 9% in the three months through August from the three preceding months. Going forward, Texas’s housing market is set to be a big drag on the state’s economy, as surging mortgage interest rates and high prices push would-be homebuyers to the sidelines. House prices are also likely to decline, although by less than in the rest of the country.
Texas GDP rose by 1.8% in the second quarter of 2022 and just 0.5% in the first quarter. The slowdown of the Comerica Texas Index shows that the state’s economy was still stuck in low gear through the summer. High inflation, surging interest rates, a rapidly decelerating national economy, and weak economies outside the US will be persistent headwinds in Texas, likely causing growth in the state to hold below trend into 2023.
