Outlook for the Texas Economy

Texas’ economic expansion maintained momentum after leading the nation in gross domestic product (GDP) growth in the second quarter. Improvements in the manufacturing and energy industries generated a large share of the increased activity. Despite a dip in oil prices, Texas continued to ramp up production above record levels.

Manufacturers noted steady demand and expanded operations accordingly. Nonfarm employment extended its two-year growth spurt and pulled the unemployment rate down to its lowest level in four decades. Wages showed signs of increasing due to labor market tightness, but inflationary pressures negated the net impact. Stagnant purchasing power failed to curtail Texans’ confidence in the economy. While survey data reinforced optimism for both consumers and producers, several risk factors are growing.

The combination of rising interest rates, oil-price volatility, and a slowdown in the global economy could challenge the current business-cycle expansion.

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