DALLAS -- Comerica Bank's latest Texas Economic Activity Index dipped for the first time in seven months as the bank's chief economist predicted "significant reduction in oil field activity in 2015."
November's reading of 107.5 fell 0.2 points below October's reading, officials said. The index remains 35 points, or 48%, above the cyclical low of 72.6. The index averaged 100.3 points for all of 2013, two and one-tenth points above the average for full-year 2012. October's index reading was 107.7.
"We expect to see more evidence of the economic drag on Texas from lower oil prices in the months ahead," said Robert Dye, chief economist at Comerica.
"The Texas economy is large and diverse and it will not turn on a dime," Dye said, "but early indicators, including the weekly drilling rig count, are already showing the impact of the new oil price regime."
Slowing exploration and production of oil and gas will lead to more layoffs in the energy sector in 2015 and reduced local demand for non-energy industries, Dye said.
"Fortunately, the broader U.S. economy is strong and this will buffer some of the downdraft from low-priced oil," he added.
The Texas Economic Activity Index consists of eight variables, including nonfarm payrolls, exports, hotel occupancy rates, continuing claims for unemployment insurance, housing starts, sales tax revenues, home prices, and the Baker Hughes rotary rig count.
Separately, San Antonio-based Frost Bank reported double-digit growth in the fourth quarter of 2014, which was in line with analysts' expectations.
"It's still too early to know where prices will go and how long they will stay at lower levels and the impact a prolonged slump in oil prices would have on the Texas economy and our customers and credits," Frost Chairman Dick Evans said in a conference call with analysts Jan. 28.
Frost Bank's energy-related loans totaled $1.8 billion, or 16% of its loan portfolio at the end of the year. In a recent stress test, the bank assumed the price of oil would be at $37 a barrel through 2015 and remain under $50 through 2018. The test showed a 7% shortfall of cash flow, assuming customers hedged their portfolios against adverse price declines and that their costs remained the same. The potential exposure was less than 1% when considering the customers' financial capacity, liquidity and assets, the bank said.
