The Odessa Economic Index increased by 3.4 points in June, the largest monthly gain since November 2011 (also 3.4 points), and the second-highest ever, behind only the 3.5 points added from February to March 2006. The June 2017 Odessa Economic Index of 197.9 is up from the May index of 194.5, and is up by 0.6% from the June 2016 OEI of 196.7. That 0.6% increase compared to the June 2016 index also represents the first year-over-year gain in the Odessa Economic Index in the current recovery.
The index has now increased for eight straight months, adding 5% to its value over that period of time. However, it remains down compared to its January 2015 peak level by nearly 15%. The pace of expansion gained considerable momentum in the second quarter, increasing at an annualized rate of an impressive 14.4% over the course of the quarter.
The spending indicators are up sharply compared to year-ago levels, along with the record June monthly building permit valuation total. Job growth continues to gain momentum and the unemployment rate is now down significantly compared to year-ago levels.
The Texas Permian Basin Petroleum Index logged its ninth straight monthly increase in June improving to 250.5 for the month up from 246.8 in May (revised slightly upward from the original May index of 246.7), and up nearly 19% from the June 2016 TPBPI of 211.0. The June rig count is at its highest level since February 2015 and is up by nearly 150% compared to June of a year ago (the rig count low point occurred in May 2016 with a monthly average of 121 for Railroad Commission Districts 7C, 8, and 8A). The number of drilling permits issued thus far in 2017 is up by over 80% compared to the first six months of a year ago, and the number of workers on upstream oil & gas (operating & producing/service/drilling) company payrolls continues to climb.
Crude oil prices retreated in June, however, with the monthly average posted (WTI) price losing over $3/bbl, falling to $41.71 for the month, the lowest since September 2016. Prices have recovered a bit since then, but price increases have proven difficult to sustain in recent months because the market fundamentals have simply not shifted to any significant degree.
Vastly improved conditions in the oil patch are propelling the Odessa general economy upward in a hurry midway through 2017. Taxable spending per June sales tax receipts was up by over 25% compared to June of a year ago, while the second quarter spending total was up by 22.5%. For the year-to-date general real (inflation-adjusted) spending is up by over 12% compared to the first six months of 2016. Real auto spending (per Ector County motor vehicle sales tax receipts) was up by a whopping 50% in June, and over 18% in the second quarter.
The June monthly building permit total – nearly four times higher than June 2016 – is the highest ever for the month of June, and is the third-highest for any month (and again, these are inflation-adjusted numbers so the comparison over time is real and valid). The second quarter real permit total is double the second quarter from a year ago, and the total for the year-to-date is up by 36% compared to midyear 2016.
The number of single-family residence construction permits was down compared to June of a year ago; however, the 57 permits issued in June 2016 was the highest ever for the month of June (while the Odessa economy was still generally in the throes of contraction), and the 48 permits issued in June 2017 is the second-highest June monthly total. Midway through 2017 the number of new housing construction permits is also the second-highest on record for the first six months of the year (273 permits, compared to the 292 permits issued through June 2013), and is a hefty 25% higher compared to the midyear 2016 total.
Following declines in 2015 and 2016, existing home sales are on the rebound in 2017 with the number of closed sales in June up by over 8% compared to June of a year ago, and the total for the year-to-date up by nearly 8% over the first six months of 2016. Price appreciation is slow thus far in 2017, but that is a blessing given the sharp housing price increases in recent years (though the annual average price in 2016 was down by about 5% year-over-year).
The real (inflation-adjusted) total dollar volume of housing sales activity was up by a solid 4% in June compared to June of a year ago, though the second quarter total was down by 2.4% year-over-year. The total for the year-to-date is up by nearly 6%, however, as the home sales sector continues a proper recovery – improvement in the number of sales absent rapid price growth, at least thus far.
The Odessa general economy is in the midst of a sharp and extraordinary recovery at the midpoint of 2017 with most local economic indicators, and indeed the Odessa Economic Index itself, increasing rapidly on the stimulus provided by a greatly improved regional oil & gas economy. Under the assumption that crude oil prices remain at least generally steady and do not decline appreciably in the near term, it is safe to assume that the balance of 2017 will bring continued economic growth and recovery in Odessa.
You will either step forward into
growth, or you will step backward
into safety.
