Texas Economic Activity Bounces Back After Freeze
Comerica Bank’s Texas Economic Activity Index increased in March to 115.3. March’s index reading was 16 percent above the recent low of 99.3 set in June 2020.
The index averaged 112.1 points for all of 2020, 13.5 points below the average for 2019. February’s index reading was revised to 114.2.
The Texas Economic Activity Index increased by 1 percent in March, as the state economy pulled out of the February freeze-out. Eight out of 9 sub-indexes were positive for the month including nonfarm employment, unemployment insurance claims (inverted), housing starts, house prices, drilling rig count, total state trade, hotel occupancy and state sales tax revenue. Only the industrial electricity demand sub-index contracted for the month.
It remains to be seen how the fall will develop in terms of COVID-19, but for the summer, Comerica expects no restrictions to the state economy due to COVID. Oil prices firmed in the second half of May to near $68 per barrel for West Texas Intermediate crude oil. The drilling rig count has improved from the extreme lows of last summer, but with 218 active rigs at the end of May, it remains well below the pre-COVID level of about 400 rigs.
Comerica expects global oil demand to continue to firm up as the U.S. and China lead the global economic recovery. OPEC has just agreed to increase output starting in July to meet growing demand. Comerica forecasts that the global crude oil glut will shrink this year even with increased OPEC output, supporting prices and motivating further moderate improvement in the Texas rig count. However, this is a different investment environment for oil drillers and gains will be restrained, says Comerica.