Following a mild decline in June the Odessa Economic Index declined sharply in July falling by over three full points to 197.3 down from 200.4 (revised slightly upward from the original 200.3) in June, and down 12.5% from the July 2015 OEI of 225.5. The housing and construction indicators drove the index downward in July, and general spending continues to register double-digit percentage year-over-year declines as well. Hotel/motel activity and airport passenger enplanements remain fully in contraction; auto spending declined in July, though by a smaller margin; the rate of year-over-year employment loss also continues to narrow (perhaps to an unrealistic degree), but the unemployment rate continues to increase compared to year-ago levels.
The regional rig count has clearly reversed course at this point, and the number of working rigs in the region has been on the rise since bottoming out in May with the weekly count adding nearly 50 rigs at this point since then. The monthly average rig count increased for the second straight month in July to 139, up from a low of 121 in May. That was insufficient to reverse the decline in the Texas Permian Basin Petroleum Index, however, which declined for the 20th straight month falling to 208.5 in July, down from 210.8 in June and down 31% from the July 2015 index of 301.5.
The monthly average crude oil price declined in July after increasing for the previous four months, retreating to $41.55 after reaching over $45/bbl in June. The number of drilling permits issued across the region (the total for RRC districts 7C, 8, and 8A) after posting a year-over-year increase in June returned to a state of sharp decline in July and remains down by 20% compared to year-ago levels.
Spending remains entrenched in contraction with real taxable spending off by 14% per July sales tax receipts in Odessa compared to July of a year ago. For the year-to-date general real spending is off by over 21% compared to the first seven months of 2015. Auto spending is still down by over 20% through July as well, though the margin of decline in July was only about 5%.
Texas Workforce Commission estimates suggest the rate of year-over-year employment decline continues to narrow significantly, especially given the deep declines in other measures of economic activity in Odessa. The July payroll employment estimates indicate a decline of only about 1.7% compared to July of a year ago, easily the lowest margin of decline thus far in 2016 following an average decrease of over 5% in the first half of the year. That number is subject to revision not just next month, but in early 2017 as well, and frankly it seems a bit early in the process to be observing that level of stabilization in the Odessa metro area employment situation.
Home sales dropped off sharply in July with the number of closed sales down by 40% compared to July of a year ago, pulling the year-to-date total to about 8% below the January-July 2015 total. The decline in the monthly average price was minimal however, with the July average down by only 1.7% compared to July of a year ago.
The number of new housing construction permits was also down significantly, but only compared to a high number in July of a year ago. The 43 permits issued in July is actually quite respectable, but the 65 permits issued in July 2015 was an all-time record for the month of July, and was up by over 60% compared to July of the prior year. The same is true of total building permit valuations – a decent July 2016 total, but down significantly compared to a record total in July of a year ago. Real building permit activity was down by nearly 40% in July compared to July of a year ago, which again was an all-time July record.
The regional oil & gas economy continues to stabilize; however, the process and pace of recovery remains tedious. The monthly watch continues for the trough in the Texas Permian Basin Petroleum Index, which serves as the leading economic index for the general economy of Odessa and the Permian Basin region as a whole.
Without continual growth and progress, such words as improvement, achievement, and success have no meaning.