• July 6, 2020

PERRYMAN: A look ahead - Odessa American: Business

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PERRYMAN: A look ahead

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Posted: Sunday, January 12, 2020 5:00 am

As 2020 begins, underlying economic trends have been positive and signs are also positive for continued growth. However, I have to say that this year may be more challenging than those of the recent past, with the single biggest threat to ongoing expansion being the level of uncertainty. Unfortunately, this consternation stems from multiple sources.

In the year ahead, the economy will be dealing with the election and all that it entails. Regardless of which candidate is elected and how the Congress changes, there will be questions related to taxes, trade, immigration, health care, and many other topics with economic implications. Businesses and markets will be keeping a close eye on possible outcomes, and we could well see delays in investment or expansion as firms take a wait-and-see approach. We will undoubtedly hear promises from both sides which are impractical and won’t ever happen, but can nonetheless chill enthusiasm. We can also rest assured that Congress will not make big changes in policy as the election looms.

Recent escalation in the conflict between the United States and Iran and other Middle Eastern tension is another cause for concern. If conditions worsen notably, there could be negative effects. However, the economy has weathered other, similar issues and there have long been risks in the region. We could see oil prices remain elevated or tick up further which, while it has positive implications for Texas, is not good for the national economy.

It is noteworthy that without the major shift in energy markets and strong production gains in the Permian Basin and elsewhere over the past several years, the implications of Middle Eastern tensions would be much more profound and lasting for the global economy. The recent elections in Great Britain may offer clarity on Brexit soon (it may not be pretty, but at least it will be known), and there are some signs of progress on trade issues with China and our North American neighbors. As the most significant exporting state, free trade is particularly important to Texas.

The Federal Reserve is likely to adjust slowly, if at all. The labor market still has a little (but very little) slack in the form of people who could be enticed into the workforce and those working part time who would prefer full-time employment. Inflationary pressures are still relatively low, however, so there is no immediate reason to change target interest rates.

All in all, the national and state economies are well positioned for expansion through next year, though as always there are things that need to be done to optimize performance. As long as the domestic and international risks remain manageable, I think we’ll see growth across most industries for 2020.

Odessa, TX

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