The Lubbock Economic Index bounced back in June to 151.8 after a small decline in May and barely missed matching its all-time high of 151.9 this April.
This promising picture of the local economy is showing an annualized growth rate of 2.0 percent for the Lubbock economy in the second quarter of 2018.
“What the index shows is that I don’t think we have too much to worry about. The Lubbock, Texas and national economy are riding on the tail wind of regulatory and tax reform measures,” said Eddie McBride, president and CEO of the Lubbock Chamber of Commerce at a press conference hosted by Lubbock National Bank.
“The business people I talk to are looking for more of those improvements as well,” he added.
The Lubbock economy has been expanding for almost seven straight years, and even though the Lubbock Economic Index shows some slower growth in the first half of this year, McBride believes the local economy will show stronger growth for the rest of this year.
“Nationally and locally, we’ve shown that we have the strength to do that,” he predicted.
There are a number of bright spots in consumer spending.
Lubbock typically sees heavier spending on hospitality in the second half of the year when travel for sports and other Lubbock events picks up, said Randy Laycock, senior vice president for the bank. “I know that hotel and motel receipts will go up further before the end of the summer.”
McBride added: “Hotel and motel use have increased in 2017 and 2018. I look forward to a home team weekend and all the hoteliers will be happy as well.”
“The other things I’m excited about is those 4,200 jobs added in Lubbock during the last 12 months, which I think is huge and will continue,” McBride said. “We have 151,400 employed in Lubbock and I think that is huge.”
Payroll employment rose by 2.9 percent compared to June 2017, which pushed Lubbock up to the No. 10 ranking among Texas metro areas for year-over-year job growth in June. The unemployment rate is improving as well; dropping to 3.2 percent for the first six months of this year, compared to 3.4 percent in the same period in 2017.
Sales tax receipts are up about 3.1 percent through the first six months of this year, but when adjusted for inflation, they’ve grown only 1.2 percent compared to the same period a year ago. In the second quarter they rose 1.2 percent compared to the second quarter of 2017, and in June there was no growth over 2017.
But there may be a good reason.
The slower growth of retail sales could be attributed to a rise of the U.S. savings rate, according to Laycock and LNB’s Chip Gilmour.
“I think people are saving more than in the past,” Gilmour said, adding the savings rate for young adults is higher.
Laycock added: “The savings rate has gone up nationally. People may be savings more for retirement.”
More than 2,200 existing homes were sold through June this year, a record for the first six months of the year and 8.1 percent higher than the same period in 2017. The average price of home sales climbed 3.5 percent in the second quarter compared to the same period in 2017. The average price in June was down very slightly compared with a year earlier.
However, when adjusted for inflation, the dollar amount of home sales in June rose 4.4 percent over 12 months, 8.5 percent in the second quarter and 8.7 percent for the first six months of the year.
Single-family housing construction fell 31 percent in June as inventory adjustments take place after the record levels of home building in 2017.
Construction activity, which grew rapidly in 2016 and 2017, has slowed this year with the real dollar value of all building permits down 46 percent in the January-June period. The second quarter total was off by 58 percent, but June brought an uptick with a 6 percent increase in permits from a year earlier.
To keep the wide swings in perspective, it was the third-highest June total on record.
Cotton and crude oil prices are moving upward, which fuels growth in the local economy. As of June, the price of West Texas crude oil has risen 52.8 percent in the last 12 months.
“The Permian Basin is the hottest oil place in the world right now,” Gilmour pointed out. “They are building pipelines like crazy.”
“U.S. production is at the highest levels since 1920,” Laycock said, explaining an oil boom in the Permian Basin always has a spill-over effect on the Lubbock economy. However, they also pointed out the price of gasoline at the pump is expected to gradually fall as the summer travel season fades away.
Cotton prices have risen 16 percent, to 81.48 cents per pound compared with June 2017. There is speculation about how Chinese tariffs may impact U.S. exports, Laycock said. There is also a question about how the strong dollar may affect the price of cotton exports.