Texas Sales Tax Revenues Rise 7.9% in September

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DALLAS — Energy production helped increase Texas sales tax revenues 7.9% in September to $2.17 billion, but clouds of concern over oil and gas prices are beginning to appear on the horizon.

"Crude oil prices are easing," a recent report from Dallas-based Comerica Bank noted. "West Texas Intermediate crude is now down to $89.56 per barrel, erasing the run-up we saw through the first half of this year, and easing overall inflation rates."

The report added that "the world is awash in hydrocarbons right now and demand in developing economies is not increasing. Natural gas prices are trending up slightly into winter, but still remain very low at $4.00 per million BTUs."

In her monthly report on sales tax revenues Oct. 8, Combs cited oil and gas activity as a factor in the higher revenues. The September increase was the 54th monthly rise, dating back to mid-2009.

"Significant growth in sales tax revenues occurred across all major economic sectors, reflecting strength in both business and consumer spending," Combs said. "The gains were led by remittances from the oil and natural gas-related and manufacturing sectors, as well as from restaurants and retail trade."

Oil futures remained under pressure Wednesday, with the price of light, sweet crude for November delivery down 1.74% to $87.30 on the New York Mercantile Exchange. That's the lowest price since April 2013 after data showed a further rise in U.S. crude supplies.

Posing a further challenge to U.S. producers relying on hydraulic fracturing of tight shale formations are indications that Saudi Arabia is willing to engage in a price war.

Commodity researchers led by Seth Kleinman at Citi noted that the Saudis are confident that their production costs are lower than those of those of the so-called fracking operations in the U.S. Other researchers have also raised concern about the profitability of the fracking operations.

Thus far, the shale boom has accelerated the Texas economy beyond the pace of the rest of the nation.

In its Sept. 23 report, Comerica said that its Texas Economic Activity Index took a breather in July, declining 0.7 percentage points to a level of 111.2. July's reading is 39 points, or 55%, above the index cyclical low of 71.8. The index averaged 105 points for all of 2013, three points above the average for full-year 2012. June's index reading was unchanged at 111.9.

"Our Texas Index eased in July reflecting cooler residential building permits after a surge last April," said Robert Dye, chief economist at Comerica Bank. "This pattern in residential building permits, and the associated drag on the headline index, is not unique to Texas. Most other components of our Texas Index are showing gains consistent with an improving overall state economy.

"We expect to see ongoing gains in our Texas Index this fall."

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