
Originally Posted by
The Midland Reporter Telegram
Midland-Odessa economy continues to power ahead
Mella McEwen<br>Oil Editor
Midland Reporter-Telegram
12/01/2006
Midland-Odessa continued to post significant gains in economic growth in October, with the Midland-Odessa Regional Economic Index coming in 11.
6 percent above the October 2005 index.
Economic growth was led by significant expansion in consumer activity and construction, fueled by the region's oil and gas industry, which is beginning to show signs its string of growth is beginning to level off.
Karr Ingham, the Amarillo economist who prepares the Midland-Odessa Regional Economic Index for West Texas State Bank and the Reporter-Telegram and the Texas Permian Basin Petroleum Index, noted the petroleum index is showing additional small signs oilfield activity may be leveling off. He said the petroleum index, which fell from August to September, the first decline in four years, was unchanged from September to October.
Even so, he said, the general economy is indicating no slowdown at all, and "if there is a change in the offing, it is certainly not apparent yet."
Phil Davis, vice president, West Texas State Bank Midland, agreed, saying, "We continue to have an impressive economic expansion under way in our local economy with staggering numbers in growth of retail sales, automobile sales, employment and new home construction."
Ingham said as he prepared the October index, he was struck by the growth in retail sales -- up 14.3 percent from September, spending on automobiles -- up 32.1 percent, and hotel/motel tax receipts, which were up 37.3 percent.
"Look at automobile spending," he said. "When you can exhibit that type of spending across the board, not just general retail spending but moving on to bigger-ticket items like automobiles, that's just the impressive nature of the economic expansion Midland-Odessa is experiencing."
Combine that with the strength in hotel/motel tax collections, he said, which indicates new money is flowing into Midland-Odessa as well. He believes, he said, the region's economic activity, especially its oil and gas activity, is drawing business travelers to Midland-Odessa and they are spending not only at motels and hotels but in restaurants and retail shops.
Construction also performed strongly in October, with permits for new homes soaring 71.1 percent to 65 from 38 issued last October.
Housing, and providing an adequate work force, are the focus of the Midland Development Corp., said MDC Board President John James.
"What we're seeing as an economic development corporation is that construction is still brisk, hiring is still brisk," he said. "The stress on labor availability is still there. It's important to try to continue to strengthen and keep alive and vibrant the economy while focusing on work force and housing."
He cited a recent study conducted by economist Ray Perryman that said West Texas "is a regional labor marketplace. You have people from Crane or Big Spring coming to fill jobs in Midland."
The entire realm of economic development, he said, includes work force issues and housing issues. Still, the tight labor and housing availability has not hindered the MDC's efforts to recruit new businesses, he added, explaining "there are a variety of companies looking for different things in the community."
Ingham said the Midland-Odessa's general economic expansion is likely to continue for several months as the area's petroleum activity levels off.
"There is probably an end in sight, at least to numbers like these," he said. "You won't keep seeing 30 percent growth indefinitely. The fact that we have been and are still seeing numbers like that says a lot about the dollars coming into the economy."
While housing construction soared 70 percent in October, sales of existing homes remained the only negative in the index, falling 3.2 percent compared to last October. Ingham attributed that continued decline to a lack of inventory and said the accompanying rise in sales prices -- up 8.3 percent to an average $121,687 from $112,408 in October 2005 -- is a sign of both lack of supply and high demand.
Even if the oil and gas economic engine that has been powering Midland-Odessa's general economy begins to level off, Ingham said it is showing signs that it could level off at a high level of activity even if oil and natural gas prices settle below their recent record highs.
The stability from September to October in the petroleum index is, he said, "another small indicator that it is leveling off rather than setting the stage for a precipitous decline and could level off at a very high level. There's still lots of activity in the oil patch."
Ideally, said James, "we would be able to bring in employees to fill jobs and let the economic engine continue running full blast."
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