Brighter Texas Economy Predicted After 'Disappointing' Year

by Alan Hunt

Economic performance in Central Texas over the past year was termed "disappointing" by Dr. Tom Kelly, director of Baylor's Center for Business and Economic Research, when he spoke at the 2003 Economic Forecast Conference on Thursday. Blaming the downturn on the Sept. 11 terrorist attacks and the "widespread distrust" of corporate America, Kelly predicted a more favorable economy next year.
Nearly 300 people attended the conference, which is annually sponsored by Baylor's Hankamer School of Business and the Greater Waco Chamber of Commerce. The program was held in the Galloway Suite at Baylor's Floyd Casey Stadium.
Kelly said Waco did not experience as much of the negative impact of the Sept. 11 attacks as other parts of the country that are more dependent on air transportation, the energy sector, or high tech and telecommunications jobs. "However, the lessening of investor and consumer confidence due to corporate scandals has universally impacted on American citizens concerned with the performance of their retirement accounts, regardless of their geographic location."
The Baylor professor said the worst of the manufacturing recession is over unless consumers decide to completely shut down in response to fears generated by threats to homeland security and corporate corruption. "Analysts are increasingly convinced that these fears are becoming excessive and are likely to calm in the near future. When this occurs, homebuilding should pick up from a slightly slower pace in early 2002 compared with a year ago. Retail sales should also pick up as confidence improves the performance of financial markets."
By the middle of 2003, Kelly predicted, growth in manufacturing output will add to local income, although job growth is unlikely to occur without the location of new establishments in the area. "Continued relatively low inflation pressures and interest rates will enable households to become less debt-ridden."
He added, "Certainly, the patience and perseverance of Waco citizens have been tested over the past year, but economic fundamentals are beginning to appear for a more favorable economy next year."
Dr. Ray Perryman, president of The Perryman Group, Waco, said the traditional strength and resilience of the Texas economy, which was prominent throughout the 1990s, "has been severely tested of late" as the weakening economic activity worldwide has reduced demand for Texas goods and services. "As a consequence, the state has faced challenges similar to those confronting the nation as a whole. Texas experienced job losses during 2001 at only a slightly slower pace than the US."
He said manufacturing, especially along the Texas-Mexico border and in the Dallas/Fort Worth and Austin areas, suffered significantly over the past twelve months, but at a rate somewhat less than what the nation experienced. High-tech production, which saw a notable decline, and business services are beginning to exhibit early signs of recovery.
Perryman said the shock of Sept. 11, corporate scandals, and general economic uncertainty adversely affected investment spending and, thus, the Texas economy. The global economic downturn has also had a negative impact on the state's exports (particularly computers, electronics, and telecommunications equipment). Construction, which had been a fast-growing industry for several years, has also shown signs of weakening, particularly in the commercial sector of major urban areas.
"The Texas economy has experienced sustained job growth in recent months, although the losses of 2001 have not yet been fully recouped," he stated. "The expansion is projected to be enhanced over the next few quarters, as the sluggish technology sectors rebound in a significant manner. The patterns of the past two years have made it abundantly clear that the health of the Texas business complex is heavily influenced by national and international conditions."
In summary, Perryman said the Lone Star State is poised to see greater positive changes in the near future with enhanced productivity and efficiency of business operations, all of which will help to achieve and enrich quality of life and higher levels of real per capita income.
He predicted, "In the years ahead, the state's relationship to the global economy will continue to strengthen, and Texas will play an increasingly important role in the international trade spectrum. The state faces significant challenges in terms of adequate fiscal revenues to meet pressing needs, incentives to be an effective competitor for new business activity, and adjustments to emerging global challenges. Nevertheless, the basic assets and resources of Texas bode well for future prosperity on both a short-term and long-term basis."