Report: Sunbelt states may outpace recovery

by Greg Barr Senior Reporter
Houston Business Journal

Six Sunbelt states, including Texas, will recover from the recession faster than other regions of the country, but the pace of recovery will be slow, according to a bank economic report.

Though the quarterly economic report issued June 23 by BBVA Compass noted that “the worst is behind us,” each state’s recovery will hinge on how well that state is able to assimilate its portion of the federal stimulus package, among other factors.

“At the moment, the economy is still contracting, so we expect to see negative GDP growth in the second quarter, but at a slower pace than in (the first quarter),” said Nathaniel Karp, the bank’s U.S. chief economist.

“Consumption, however, is expected to lead the resurgence in economic activity in the second half of the year, but the high unemployment rate, the greater propensity to save and the high degree of uncertainty regarding the impact of the fiscal stimulus package could present risks to this scenario.”

Though the economists believe Texas’ economy is weakening as home prices gradually decline this year — while other Sunbelt states that saw much steeper declines level off or move higher — and the global recession deepens, the state is still ahead of the national curve.

“In 2009, economic growth will be negative in all the states in the Sunbelt excluding Texas, where GDP will be positive in real terms,” the report said.

The BBVA Compass economists predict that only Texas and Colorado will see GDP growth stay flat in 2009, compared to the six-state average 1 percent decline and 2 percent drop nationwide. Texas GDP is expected to grow by 1.7 percent in 2010.

Employment will decline 2.3 percent in Texas this year, compared to a 3.8 percent drop across the U.S.

The study covered economic activity in Texas, Arizona, Colorado, Florida, Alabama and New Mexico, the six states in which BBVA Compass operates.