By Kathryn Paradis
The outlook for the Texas economy in 2019 is good, but not so much for the global economy, according to research economist Harold Hunt, Ph.D., with Texas A&M University in Waco.
The Bay Area Houston Economic Partnership invited him to speak at its annual State of the Economy luncheon, held March 28 at Lakewood Yacht Club in Seabrook. Hunt opened his presentation by cautioning, “It’s going to start off pretty grim. I need you to hang with me, because it’s going to get better at the end.”
He reported that the global economic growth is slowing, vulnerable, and unsynchronized. German industrial production is falling. Brexit is a confusing mess, which increases uncertainty in the European Union. Japanese growth remains weak while Chinese economic growth is also decelerating. Hunt said that the slowing of Chinese GDP (Gross Domestic Product) growth is very much on the radar and is “really a big deal.” Hunt explained, “The fear is obviously that if China goes down, then the EU goes down. If the EU goes down, then we go down. There is a domino effect, and that is why we are seeing so much in the press.”
He then turned to the positive aspects of the U.S. economy. U.S. consumer confidence is stronger than it was 12-15 years ago, according to Hunt. The U.S. Bureau of Labor Statistics reports that inflation expectations over the next five years are still quite low at an average of 2 percent.
Is it possible to have a recession this year? Hunt explained that it isn’t impossible. He said that real GDP would have to fall a lot. “To get a recession this year, with GDP at 2.9 percent last year, the GDP would have to drop like a rock. Based on the hard data I’ve just showed you, I just don’t see that happening,” he said.
Overall, Hunt stated that the 2019 economy should be slower than 2018, but 2019 will still be a good year for Texas. Houston will see $2.5 billion more in construction contracts versus last year. As with Texas overall, an oil price in the mid-$50 to $60 range per barrel will keep the Houston economy stable, according to Hunt.
(Editor’s note: Dr. Hunt’s entire slide presentation with many, many more details can be viewed as a pdf on BAHEP’s website at https://www.bayareahouston.com/content/News_Events_and_Reports/reports.)