A look at the sustainability factors of the Energy Capital
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Without a doubt, Houston has one of the strongest and most dynamic economies in the world. However, this year has been a challenge. More than half of the fleet of oil rigs nationwide has suspended its activity and now operates in its lowest level since May 2015. And now, everyone’s question: Is Houston headed for a recession?
The U.S. Bureau of Labor Statistics (BLS) reports that the Consumer Price Index (CPI) rose 0.3 percent in Houston for a year through August, the first increase since January of this year. Local inflation has been negative for much of 2015, a dramatic change in the past two years, when inflation in Houston had outpaced that of the nation.
What has helped keep inflation under control was the 13.1% drop in the cost of home energy and the 27.2% drop in fuel. This consumer energy decline is not surprising, as oil fell 55.6% and natural gas 29.2% during the same period. (Almost half of the electricity generated in Texas comes from natural gas-fired thermoelectric plants.) CPI’s housing component continues to grow thanks to 5.1% since August 2014 and 19.2% since January 2010.
The CPI suggests that local housing costs have risen by nearly a fifth during the recent economic boom. Based on anecdotal evidence, that figure appears to underestimate escalating housing costs. This apparent understatement may result from the method the BLS uses to measure housing inflation.
Home Price Index
The Federal Housing Finance Agency (FHFA) publishes a quarterly Home Price Index (HPI) that measures the values of a home. The index is based on the repeated sale or refinancing of the same properties, even if they are resold several times with mortgages or are deeded by the Federal National Mortgage Corporation or the Federal Home Loan Mortgage Corporation.
The index shows that the cost of housing in Houston increased 37.9% from 2010 to 2015. And there are several factors that promote growth, including the shortage of lots to build new homes (which motivates the resale market) , the influx of newcomers that drives the demand for housing (both rental and purchase), and the tendency of buyers to bid above the price list.
This rise in home prices begs the question: Has Houston lost its vision of being one of the most accessible regions to live in? The answer depends on one’s perspective.
Cost of Living
Basically, Houston’s cost of living remains below the national average. Three times a year, the Council for Community and Economic Research (C2ER) conducts a survey on the cost of living in urban areas of the country. Like the BLS survey, the C2ER analysis is based on several factors – groceries, housing, utilities, transportation, healthcare, among others – which represent typical shopping patterns among consumers. While the CPI measures changes in prices over time, the C2ER index compares the same factors in different urban areas. The third-quarter 2015 study found that Houston’s cost of living was 7.2 percent below the national average.
Foreign Trade in Houston
Houston’s international reputation is reflected in its economic depth and business breadth. Over the past decade, 313 companies based outside the United States have announced more than $ 7.3 billion in foreign direct investment and provided 19,000 jobs in the region.
The Houston-Galveston Customs District – which includes the ports of Houston, Galveston, Freeport, Texas City, Corpus Christi, Port Lavaca, George Bush Intercontinental Airport, and Sugar Land Regional Airport – handled $ 252 billion in foreign trade in 2014, ranking it as the fifth-largest borough behind Los Angeles ($ 417.8 billion), New York ($ 386.8 billion), Laredo ($ 279.8 billion) and Detroit ($ 261.8 billion).
More than forty countries registered one billion dollars in the customs district in 2014. Among the 10 largest, which represented 51.3% of all trade, are Mexico, China, Brazil, Venezuela, Saudi Arabia, Colombia, Germany, Holland, South Korea and Russia.
Imports totaled $ 121.9 billion dollars in 2014, with oil and its derivatives ($ 57.5 billion dollars), industrial machinery ($ 11.5 billion dollars), iron and steel manufacturing ($ 9.5 million dollars), organic chemicals ($ 6 million dollars) and electrical machinery ($ 5.9 million).
Regarding exports, these totaled $ 130.6 billion dollars and its main ones include refined petroleum products ($ 52.9), industrial machinery ($ 19.8 billion dollars), organic chemicals ($ 15.9 billion dollars), plastics ($ 7 million dollars) and electrical machinery ($ 5.2 million).
The strength of the US dollar and the fall in the price of oil and gas led to a depreciation in Houston’s foreign trade. Exports fell 14.7 percent – from $ 99.8 billion in September 2014 to $ 85.2 billion in September 2015. While imports fell 27.1 percent – from $ 93.9 billion in September 2014 to $ 68.5 billion in September 2015.
Despite the decrease in the total value of trade, the weight of the vessels increased 2.4%, from 184.7 to 189.1 million kilograms.
Mineral fuels and petroleum, industrial machinery, and organic chemicals have been the top three products traded (by commercial value) since 1998, according to available information.
The top five accounted for 74.2 percent of Houston’s total business value in 2014. The top 25 made up 94.1 percent.
Houston’s trade in 2014 increased 0.6% from 2013. Pharmaceuticals had the highest growth within the top 25 with 81.7%; followed by iron and steel with 46.5%; and finally, drinks, liquors and vinegar with 22.2%.