Report: Sunbelt States Likely To Lead A Slow Recovery

Phoenix Business Journal

Six Sunbelt states, including Arizona, are poised to recover from the recession faster than other regions of the country, but the pace of recovery will be slow, according to BBVA Compass’ quarterly economic report.

The report says that “the worst is behind us,” but each state’s recovery will hinge on factors including how well it is able to assimilate its portion of the federal stimulus package.

“At the moment, the economy is still contracting, so we expect to see negative GDP growth in the second quarter, but at a slower pace than in (the first quarter),” said Nathaniel Karp, the bank’s U.S. chief economist.

In Arizona, GDP is expected to contract by 2.8 percent this year, more than the Sunbelt average of minus 1 percent and the national average of minus 2 percent. A move back to positive territory is expected for 2010 — a .9 percent gain for Arizona, 1.5 for the region and 1.1 percent for the nation, according to the report.

“Consumption, however, is expected to lead the resurgence in economic activity in the second half of the year, but the high unemployment rate, the greater propensity to save and the high degree of uncertainty regarding the impact of the fiscal stimulus package could present risks to this scenario,” Karp said.

The report points to the Sunbelt’s unemployment rate hovering a percent under national figures and notes that it fell slightly in Arizona, Colorado, Florida and New Mexico during April. Initial unemployment insurance claims have fallen throughout the region, except in Arizona, according to BBVA.

Employment is expected to decline 6.4 percent in Arizona this year, compared to a 3.8 percent drop across the U.S.

Arizona home sales have increased for three consecutive quarters, a trend in states hit hardest by the real estate crash. Prices here, however, are expected to end the year with a 6.2 percent decline, the report says. That compares with BBVA’s predicted drops of 6.3 percent for Sunbelt states and 4.3 percent nationally. In 2010, the bank is looking for a 1.3 percent gain in Arizona, compared with 0.1 percent in the region and 1.7 percent nationally.

The report also notes that Arizona led the pack among the small number of states seeing a rise in building permits during April.

The study covered economic activity in Texas, Arizona, Colorado, Florida, Alabama and New Mexico, the six states in which BBVA Compass operates.