GHP’s Economy at a Glance

The Greater Houston Partnership published their Houston: The Economy at a Glance on February 11th, 2020. The document is used to evaluate the impact of current worldly events, such as Brexit and the newest SARS-CoV-2 virus, on Houston and its economy.

SARS-CoV-2 (The Coronavirus)

On the last day of January, the World Health Organization (WHO) declared the newest Coronavirus a global health emergency. The virus, as of February 10th, has claimed the lives of 909 Chinese citizens. While those numbers are startling the mortality rate is still much lower than the 2003 SARS outbreak. The largest impact our region will see is the reduction of crude oil purchased by China which causes prices to drop and may result in fewer wells drilled as well as some firms struggling to stay whole. Economists ensure that once the virus is contained, trade and normal business will resume.

US China Trade

The two year trade war with China has come to an end. On January 15th, a truce was signed with the understanding that over the next 2 years Beijing (who is known to manipulate currency) would allow easier access to the Chinese markets for U.S automakers and financial firms. China also agreed to purchase an additional $200 billion of goods and services from the U.S., and protect U.S. intellectual property on top of respecting market-based exchange rates. The U.S. agreed to cut import tariffs from 15% to 7.5% for $120 billion and suspend the $160 billion tariff for electronics all together. $250 billion of Chinese imports will still have 25% in tariffs imposed on them. During the trade war Houston-China trade dropped 18.9% for imports and 38.9% for exports but is expected to see an increase of purchased chemicals and natural gas as the strains between both countries clear.

Interest Rates

The U.S. Federal Reserve’s Federal Open Market Committee signaled no fear of a U.S. recession with the vote to not change interest rates on January 28th. With the U.S. economy being the largest deciding factor of the Houston Economy this move represents a good outlook for Houston.

U.S.-Mexico-Canada Agreement (USMCA)

The new USMCA took the place of the ’94 North American Free Trade Agreement. This agreement spells out how Mexico’s auto industry is to take better precaution and make more environmentally responsible decisions while all vehicles made in North America use more North American-made parts. The USMCA also states that Canada is to allow U.S. dairy products into their markets and defines the need for Mexico to have more transparent union elections. This agreement should continue to boost trade numbers with Canada and bring numbers with Mexico back up after exports with the country dropped, leaving them in a slight recession.

Brexit

The United Kingdom exiting the European Union may be a positive for Houston. With 169 British firms already operating in the city and the UK being 9th amongst trading partners more trade ties are bound to be made as the January 2021 date approaches.

For more information and even more economic analysis please visit GHP’s site here.

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