MIDLAND-ODESSA - The Midland-Odessa Regional Economic Index posted a third consecutive monthly decline in the aftermath of the sharp drop in crude oil prices and contraction in oil field activity.
What was unexpected was the very modest decline in the index, prepared by Amarillo Economist Karr Ingham for Security Bank and Midland Development Corp.
"So far there’s been a softer change in direction than expected,” said Ingham. Though the index is 7.8 percent above April 2014 levels, “the change in direction is unmistakable” as it declined slightly from March levels.
“It’s a little encouraging that the index doesn’t appear to be reaching a quick peak and then dropping off a cliff. It may be absorbing the oilfield contraction better than we might have thought,” Ingham said.
The contraction in Permian Basin oilfield activity that has resulted in a 60 percent drop in the rig count has yet to show up in the two key components of the index, consumer spending and employment, Ingham said.
April retail sales were up 2.6 percent compared to last April and are up 8.6 percent for the first four months of the year compared to the same period last year. Ingham noted that growth rates have narrowed considerably in recent months.
“Year-over-year growth per the month of the sales tax rebate was as high as 19 percent in late 2014 and 15 percent in January 2015 and has now fallen to 2.6 percent in April,” he said.
"Clearly this is a transition period. It’s unavoidable, but it’s not the worst thing that could happen,” Ingham said.