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2006 News Releases
For immediate release:
August 15, 2006
Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org
Economic Growth of
Texas Metros, Basel’s Impact on Bank Capital Requirements
and Oil Prices Featured in Dallas Fed Publication
DALLAS—The economic expansion
of Texas’ largest cities, the potential effects
of Basel IA capital requirements on Eleventh District
banks and a discussion of high oil prices are featured
in the latest issue of the Federal Reserve Bank of Dallas’
Southwest Economy.
In “Midyear Update: Major
Metros Driving Texas Expansion,” associate economist
D’Ann Petersen finds that Austin, Dallas, Fort
Worth, Houston and San Antonio are enjoying solid economic
growth, which appears poised to continue through 2006
and into 2007.
Petersen’s findings include
the following:
- Austin maintains a slight lead over Dallas in employment
growth to date in 2006, with affordable housing a
key factor in attracting people and companies.
- Dallas’ economy has restructured since the
tech bust and is currently expanding at a robust pace.
Strong growth in the professional and business services
sector has helped boost demand for office space.
- Fort Worth’s economy is showing moderate
growth this year. The city avoids wild economic swings,
in part, due to a solid base in defense-related manufacturing.
- In Houston, energy remains the dominant economic
sector. With oil producers viewing high energy prices
as a long-term factor, the number of drilling support
jobs has surged.
- Despite a diminishing military presence, San Antonio’s
economy is growing with the financial services sector
leading the pack.
- Border cities are exceeding state job growth averages.
Maquiladoras in Ciudad Juárez are helping boost
service industries in El Paso.
In “Making Sense of High Oil Prices,” director of energy economics Stephen P.A. Brown says
strong global demand and uncertain supply are behind
spiraling oil prices that are slowing economic growth.
Oil prices have more than doubled
in the past few years—driven by surging demand
in growing global economies like China and India, and
concerns about supply from turbulent oil-producing countries,
according to Brown.
He challenges assumptions that
oil companies—which are experiencing record profits—are
behind the spike at the pump.
“World oil markets are dominated
by producing countries—not oil companies,”
Brown says. “Anytime a company sees rapid increases
in the price of what it sells, it’s going to do
well.”
Brown also finds higher oil prices
are affecting the economy: “Growth is slower.
Inflation and interest rates are higher. I estimate
that the tripling of oil prices since 2002 has reduced
GDP by 2.4 to 3.2 percent, spread out over a number
of years.”
In “Banking on Basel: An
Alternative for Capital Requirements,” senior
economist and policy advisor Kenneth J. Robinson and
financial industry analyst Kory Killgo examine the potential
effects of proposed Basel IA capital requirements on
Eleventh District banks.
Banks with more conservative portfolios
could experience a decrease in capital requirements,
while those with more aggressive portfolios might see
an increase, according to Robinson and Killgo. The result
could be that aggressive banks might have to adjust
their capital positions by reducing dividends, issuing
stock or qualified debt, or rebalancing their portfolios
toward less risky holdings.
“Since capital supports
lending activity, changes to banks’ capital profiles
could affect credit availability and local economies,”
the authors write.
Find the July/August issue
of Southwest Economy online at www.dallasfed.org.
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