Economic forecast

Slowdown, yes, but talk of a recession might be premature, Neeley researchers say.

The recent U.S. economic slowdown is not the start of a recession, but rather a pause in economic growth that will set up the second leg of economic expansion. So says researchers at the Center for Business and Economic Forecasting at the Neeley School of Business.

Here are a few of the forecasts:

In the U.S.
Sectors driving economic growth will shift from auto and housing to business investment and exports. Housing and subprime mortgage problems will be offset by the strength in business investment and exports and continued growth in consumption. Inflation will moderate and the relationship between long-term and short-term interest will normalize, resulting in an upward sloping yield curve.

In Texas
Unemployment for Texas will continue to beat the U.S. averages. Energy growth will slow somewhat in the short term. Telecom growth is expected to act as a brake on some areas, with job cuts announced by Alcatel, Nortel and TI for 2007 (Dallas), but will be offset by some growth in Samsung, AMD, Intel and Dell (Austin).

Dallas
The Dallas area will experience an above-average growth rate, but will see some problems in the tech sector with layoffs already announced in 2007. Defense contractors will experience slower growth due to a reduction in spending. Housing in the Dallas area has experienced a slowdown in growth, but by 2008 approximately 30,000 single-family permits are expected, falling just short of 2004 and 2005 levels. There will be strong movement in housing to Denton and Collin counties with continued upward pressure on new construction pricing due to land price increases. Collin county will continue to be the strongest single-family housing market, followed by Dallas county and then Denton county. Dallas is expected to have a net in-migration in 2007 and for several years beyond.

Fort Worth
The Fort Worth area will experience a slower growth rate than Dallas, largely due to manufacturing, retail industries and travel and tourism industries. Energy is expected to grow at a rapid pace due to the continued impact of Barnett Shale drilling. Fort Worth’s housing market will not recover as rapidly as Dallas, with single-family permits expected to grow to around 14,000 by 2008. This is considerably under the peak year of 2005 when about 18,000 single-family permits were issued. Fort Worth is expected to have a net in-migration in 2007 and for several years beyond.

The Center for Business and Economic Forecasting at the Neeley School of Business researches, studies and provides evaluations of organizations’ future economic environment to enhance operational and strategic planning.

For information: www.cbef.tcu.edu

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