- Diverse economy, changes in oil and gas sector help avoid negative impact, they say
- State's economic outlook is still bright in the long run, their report concludes
HOUSTON, Dec. 9, 2015 /PRNewswire/ -- Shifts in global growth fundamentals such as the strengthening of the U.S. dollar and repressed oil prices may have weakened the outlook for Texas, but the economy is still expected to grow 1.9 percent in 2015 before returning to its full potential in 2017, BBVA Compass economists say in their latest report.
Three factors contributed to the Lone Star state's ability to stave off a recession, the bank's economists say: the discordant timing of the impact from a strengthening dollar and the mining sector slowdown; the evolution of the oil and gas industry structure so that it's more innovative and flexible; lower systemic risks to the financial sector as a result of its lower risk appetite and a more cautious lending environment.
"We maintain that there would have to be prolonged periods whereby (West Texas Intermediate) spot prices remain below $30/barrel, and significant deterioration in manufacturing output and exports, for Texas to be at risk of negative growth," wrote BBVA Compass Senior Economist Boyd Nash-Stacey. "In the long run, the outlook for Texas remains bright."
Despite rampant layoffs across the oil sector, Texas is today more diverse and less reliant on oil for economic growth than in the past, Nash-Stacey wrote, putting the overall impact of the oil price depression on the economy at moderate to mild.
"The industry has undergone a transformation, with shale drilling offering a production function that is less lumpy, offers faster paybacks and the flexibility to respond to business cycles and commodity price fluctuations," he said.
Nash-Stacey said that this and other findings underpin the BBVA Compass economists' conclusion that the risks to the Texas economy have tilted to the downside.
"Ultimately," he concluded, "short-term factors will inevitably fade, again bringing to the forefront Texas' true value as a global leader in growth and innovation."
For more from the BBVA Economic Research team, click here.
About BBVA Group
BBVA Compass is a subsidiary of BBVA Compass Bancshares Inc., a wholly owned subsidiary of BBVA (NYSE: BBVA) (MAD: BBVA). BBVA is a customer-centric global financial services group founded in 1857. The Group has a solid position in Spain, is the largest financial institution in Mexico and has leading franchises in South America and the Sunbelt region of the United States. Its diversified business is geared toward high-growth markets and relies on technology as a key sustainable competitive advantage. Corporate responsibility is at the core of its business model. BBVA fosters financial education and inclusion, and supports scientific research and culture. It operates with the highest integrity, a long-term vision and applies the best practices. The Group is present in the main sustainability indexes. More information about the BBVA Group can be found at bbva.com.
About BBVA Compass
BBVA Compass is a Sunbelt-based financial institution that operates 672 branches, including 341 in Texas, 89 in Alabama, 77 in Arizona, 62 in California, 45 in Florida, 38 in Colorado and 20 in New Mexico, and commercial and private client offices throughout the U.S. BBVA Compass ranks among the top 25 largest U.S. commercial banks based on deposit market share and ranks among the largest banks in Alabama (2nd), Texas (4th) and Arizona (4th). BBVA Compass has been recognized as one of the leading small business lenders by the Small Business Administration, and its mobile app recently earned the Mobile Banking Leader in Functionality Award for the second consecutive year from Javelin Strategy & Research. Additional information about BBVA Compass can be found at bbvacompass.com, by following @BBVACompassNews on Twitter or visiting newsroom.bbvacompass.com.
Editor's Note:
BBVA Compass is a trade name of Compass Bank.
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SOURCE BBVA Compass
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