• Save
Roberto Coronado, Outlook for the El Paso-Juarez Region, Federal Reserve Bank of Dallas - El Paso Branch
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
1,199
On Slideshare
1,198
From Embeds
1
Number of Embeds
1

Actions

Shares
Downloads
0
Comments
0
Likes
0

Embeds 1

http://www.google.com 1

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Outlook for the El Paso-Juarez Border Region Roberto Coronado Economist Federal Reserve Bank of Dallas, El Paso Branch Paso del Norte Group March 22, 2011The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or of the Federal Reserve System. Any secondary distribution of this material is strictly prohibited. May be quoted with appropriate attribution to the author.
  • 2. El Paso is Recovering at Full Speed205 -4.8% from peak200195190 +3.8% from bottom185 U.S. Recession of 2001 and jobless recovery180175170165160 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Federal Reserve Bank of Dallas
  • 3. Percent Change in El Paso Employment (Dec/Dec)4 3.63 2.7 2.8 2.5 2.6 2.0 2.0 2.02 1.9 1.5 1.11 0.90 -0.3-1 -1.1 -1.2-2 -2.3-3 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* Notes: 2011 is Jan/Jan. Source: Federal Reserve Bank of Dallas.
  • 4. El Paso Employment 2000-Present (000s, SA)285.0280.0275.0270.0265.0260.0255.0250.0245.0240.0235.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Federal Reserve Bank of Dallas
  • 5. El Paso’s Recession Milder Than Other Border CitiesMetro Area Peak Trough Decline Bottom to (%) Today (%)Texas June 2008 November -5.6 2.9 2009El Paso February 2008 September -4.8 3.8 2009Brownsville February 2008 August 2009 -5.4 2.1Laredo August 2007 November -19.1 3.8 2009McAllen Feb 2008 March 2010 -15.8 3.2
  • 6. Unemployment Rate El Paso vs. US, SA El Paso now matches U.S. Unemployment Rate12.010.0 El Paso 8.0 6.0 4.0 U.S. 2.0 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 The Federal Reserve Bank of Dallas and the Bureau of Labor Statistics
  • 7. What Makes the El Paso Economy Work?  U.S. economy, in particular industrial sector  The Mexican economy and the exchange rate  Maquiladoras  Local Military Spending
  • 8. U.S. recovery is gaining traction…
  • 9. Gross Domestic Product Quarterly Percent Growth, Chained 2005 Dollars97531-1-3-5-7 Source: Department of Commerce and Bureau of Labor Statistics
  • 10. Divide GDP into Inventory Change and Final Sales• GDP = Final Sales + Inventory Change• Final Sales = C + If + G + X – M• Final Sales are sales from current production• Change in inventory is negative, it is a draw of past production for current use• Change is inventory is positive, it is current production held for future sales
  • 11. Percent Contribution to GDP By Sector -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 -1.1 -1.0 1.1Inventory Change 2.8 2.6 0.8 1.6 -3.7 -3.8 0.3 0.5 Final Sales 2.2 1.1 0.9 1.0 6.5 2009 - Q1 2009 - Q2 2009 - Q3 2009 - Q4 2010 - Q1 2010 - Q2 2010 - Q3 2010 - Q4
  • 12. Nonmanufacturing ISM Points to a Continued Pick-up in Near-term GDP Growth Q/Q % change,SA Index, 50+ = Econ Expand annualized 65 8 ISM Non-manufacturing 6 60 4 55 2 Real GDP Growth 50 0 -2 45 -4 40 -6 35 -8 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: Bureau of Economic Analysis and the Institute of Supply Management
  • 13. Payroll employment gained momentum in FebruaryThousands (SA) 600 400 February 136K 192K 200 0 -200 -400 3-month MA Δ in Payrolls -600 -800-1000 03 04 05 06 07 08 09 10 11 Source: Bureau of Labor Statistics
  • 14. Private employment continue to post gains since early 2010Thousands (SA) 600 February 400 152K 222K 200 0 -200 -400 3-month MA -600 Δ in Payrolls -800-1000 03 04 05 06 07 08 09 10 11 Source: Bureau of Labor Statistics
  • 15. U.S. unemployment rate begins to decline11.010.0 February 2011 = 8.9 % 9.0 8.0 10.8% on Nov/Dec 1982 highest since 1948 7.0 6.0 5.0 4.0 3.0 00 01 02 03 04 05 06 07 08 09 10 11 Source: Bureau of Labor Statistics
  • 16. U.S. manufacturing sector continues to grow Index2007= 100, SA10510095908580 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Board of Governors, Federal Reserve System
  • 17. U.S. manufacturing sector gaining momentumSA, 50+ = Increasing8070 ISM Manufacturing: New Orders Index6050 ISM Manufacturing Index403020 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Institute of Supply Management
  • 18. Coincident Index Shows Growth Gaining Speed1081071061051041031021011009998 2006 2007 2008 2009 2010 2011 Source: The Conference Board
  • 19. Leading Index Points to Pick Up in Economic Activity1161141121101081061041021009896 2006 2007 2008 2009 2010 2011 Source: The Conference Board
  • 20. Real GDP Unemployment Industrial (Annual %) Rate (%) Production (% Annual Rate) Blue Chip Philly Fed Blue Chip Philly Fed Blue Chip Philly Fed2011 3.1 3.2 9.0 9.1 4.5 4.42012 3.3 3.1 8.4 8.5 4.1 4.22011 Q1 3.4 3.6 9.2 9.3 4.4 4.62011 Q2 3.4 3.5 9.1 9.2 4.4 4.22011 Q3 3.4 3.1 8.9 9.0 4.5 4.42011 Q4 3.4 3.4 8.8 8.8 4.4 4.32012 Q1 3.1 3.1 8.6 8.7 4.1 3.7
  • 21. Mexico is also in recovery mode…
  • 22. Percent Growth of Mexicos GDP 1990 to PresentPercent8 7.2 6.06 5.2 5.5 5.2 5.5 4.8 5.0 4.2 4.04 3.6 3.6 3.3 3.2 2.52 1.4 1.5 0.10-2 -0.9-4-6 -6.2 -6.1-8 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Instituto Nacional de Estadística Geografía e Informática
  • 23. Link Between U.S. and Mexico Economies In the Industrial Sector120 (Index, 2003=100)115 Mexico110105 U.S.1009590 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Board of Governors and Instituto Nacional de Estadística Geografía e Informática
  • 24. How are the U.S.–Mexican industrial sectors linked? • 18 percent of U.S. exports go to Mexico • 72 percent of U.S. exports to Mexico are industrial products • 8 percent of U.S. imports are from Mexico • 90 percent of these imports are industrial • Maquiladoras are a major vehicle for this cross- border movement of industrial goodsSources: Foreign Trade Division, U.S. Census Bureau, and U.S. International Trade Commission
  • 25. US-Mexico trade: mostly intra-industry Imports Exports SITC SITC Product Billions $ Product Billions $ Code Code1 33 PETROLEUM 41.6 1 77 ELECTRICAL MACHINERY 16.62 78 ROAD VEHICLES 32.1 2 78 ROAD VEHICLES 13.9 TELECOMMUNICATIONS/SOUND3 76 31.2 3 33 PETROLEUM 9.6 RECORDING OFFICE/AUTOMATIC DATA4 77 ELECTRICAL MACHINERY 22.3 4 75 7.3 PROCESSING MACHINES GENERAL INDUSTRIAL5 74 9.2 5 74 GENERAL INDUSTRIAL MACHINERY 7.2 MACHINERY POWER GENERATING MACHINERY TELECOMMUNICATIONS/SOUND6 71 7.3 6 76 6.6 AND EQUIPMENT RECORDING PROFSSIONAL/SCIENTIFIC MISCELLANEOUS MANUFACTURED7 87 6.4 7 89 6.6 INSTRUMENTS ARTICLES OFFICE/AUTOMATIC DATA8 75 6.4 8 57 PLASTICS IN PRIMARY FORMS 5.6 PROCESSING MACHINES POWER GENERATING MACHINERY9 5 VEGETABLES AND FRUIT 5.9 9 71 5.3 AND EQUIPMENT SPECIAL TRANSACTIONS AND10 93 5.1 10 51 ORGANIC CHEMICALS 5.2 COMMODITIES Subtotal 167.6 Subtotal 83.8 Other 48.3 Other 67.7 Total 215.9 Total 151.5
  • 26. Mexico’s value-added in auto production at record high US-Mexico Balance of Trade 30,000 (US Imports minus US Exports)Millions 25,000 20,000 15,000 10,000 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sources: U.S. Dept. of Commerce and the U.S. International Trade Comission
  • 27. Mexico Auto Exports March 2004-Present, SA 3-mo Moving Avg.200,000180,000160,000140,000120,000100,000 80,000 60,000 40,000 20,000 0 Source: Asociación Mexicana de la Industria Automotriz, A.C.
  • 28. Trade in apparel lost to China, a growing role for autos Real $, Index, 1997:Q1 = 10025020015010050 0 Transportation Equipment Apparel
  • 29. Mexico gains ground in North America light vehicle production 1985 2009 Mexico 3% Canada 14% Mexico 17% Canada 17% USA 83% USA 66%Source: Thomas H. Klier, Federal Reserve Bank of Chicago, with data from Ward’s Automotive Group.
  • 30. Mexico becomes largest source country of U.S. motor vehicle parts Percent 35% Mexico 30% 25% Canada Japan 20% 15% Rest of World China 10% Germany 5% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Source: Thomas H. Klier, Federal Reserve Bank of Chicago, with data from International Trade Commission.
  • 31. Growth began as export-drivenIndex, Jan 2000=100250200150100 Exports to US 50 Total Exports 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Secretaría de Hacienda y Crédito Público, Banco de México, Instituto Nacional de Estadística Geografía e
  • 32. Consumption is picking upRetail sales, Index 2007=100 Household credit5mma, s.a. Index, s.a., January 2007=100104 140103 130102 120101100 110 99 100 98 90 Retail sales 97 Household credit 80 96 95 70 94 60 Sep-08 Sep-07 Sep-09 Sep-10 Mar-08 Jan-07 Mar-07 Nov-07 Jan-08 Nov-08 Jan-09 Mar-09 Nov-09 Jan-10 Mar-10 Nov-10 May-07 May-08 May-09 May-10 Jul-07 Jul-08 Jul-09 Jul-10
  • 33. The domestic market is catching up (Index, January 2007 = 100, 3mma, seasonally adjusted) 105 100 95 90 85 Consumer Confidence 80 Consumer Expectations 75 70
  • 34. C&I lending coming back… y-o-y growth rates4540353025201510 5 0-5
  • 35. Employment is growing again…Thousands of workers y-o-y growth rates1,000 10 800 8 600 6 400 4 200 2 0 0 -200 -2 -400 -4 level -600 -6 yoy% -800 -8-1,000 -10 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
  • 36. What about the Border region?Index, 2003:Q1 = 100140130120110 Coahuila de Zaragoza100 Nuevo León Tamaulipas 90 Mexico Chihuahua 80 2003 2004 2005 2006 2007 2008 2009 2010 NOTES: Indicador trimestral de la actividad económica estatal (ITAEE) and Indicador global de la actividad económica. SOURCE: INEGI
  • 37. Mexico’s recovery underway• In 2010, economic growth was fueled by manufacturing exports, higher oil prices, and capital inflows.• The shape of the recovery going forward depends on the U.S. industrial sector• The domestic market continues to improve with retail sales and consumer confidence picking up.• International reserves rose 25% and now stand at $122 billion.• The peso continues to appreciate; now at $12.05 pesos per dollar.• In the wake of the presidential elections next year, Mexico set up a contingent credit line with the IMF in the amount of $73 billion.
  • 38. Outlook for the Mexican economy 2011 GDP 2012 GDP Forecast (%) Forecast (%) Banxico (3/11) 4.1 4.0 Banamex (3/11) 4.8 3.8 Bancomer (2/11) 4.3 3.8 IMF (10/10) 3.9 n.a. Blue Chip (3/11) 4.1 3.7UTEP BRMP (12/10) 3.2 n.a.
  • 39. Juarez and the Maquiladora Industry
  • 40. El Paso Follows Maquiladora IndustryThousands, SA Index Jul-1992=100280 210260 200240 190220 Juarez Maquiladora Employment 180200 170180 El Paso CI 160160 150140120 140100 130 1990 1993 1996 1999 2002 2005 2008 2011Source: INEGI and Dallas Fed
  • 41. Economic integration at PDN 0.4 El Paso-Ciudad Juarez 0.04U.S. border City Employment 0.3 0.03 Maquiladora Value Added 0.2 0.02 0.1 0.01 0 0 -0.1 -0.01 -0.2 -0.02 -0.3 -0.03 1991 1992 1993 1994 1995 1996 1997 1998 1999 2003 2004 2005 2006 2000 2001 2002 Maquiladora Value Added U.S. Border City Employment
  • 42. Juarez Maquiladora Employment m-o-m annual rates80604020 0-20-40-60 2007 2008 2009 2010 2011 FRB El Paso Estimate U.S. IP IMMEX
  • 43. Maquiladoras are Rebounding110 Matamoros Nuevo Laredo Reynosa Juarez105100 95 90 85 80 75 70 65 60 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Source: Manufacturing, Maquiladora, and Export Service Industry (Mexico)
  • 44. Maquiladoras impact on El Paso• 10 percent increase in maquiladora output in Ciudad Juarez leads to an increase in El Paso employment as follows: − 3.0 percent increase in total employment − 5.4 percent in transportation employment − 1.4 percent in retail trade employment − 2.2 percent in finance, insurance and real estate (FIRE) employment − 2.0 percent in services employment − (-) 1.2 percent in manufacturing employment
  • 45. Has the maquiladoras’ impact to the El Paso economy changed over time?• Over the years, the bulk of the impact has switch from the manufacturing sector to the services sector.• El Paso continues to be a supplier to the maquiladoras in Juarez, but we now supply business services.• This is good news to us because these type of jobs pay higher wages than the traditional manufacturing jobs
  • 46. Peso Devaluation Hurts Local Retail Sales
  • 47. Retail Sales to Mexican Nationals By US Border City (Net of Sales by US Shoppers in Adjacent Mexican City)Share of Exportable Retail Sales Real Exchange Rate, 2007=100, Pesos/$ 70 19 60 17 15 50 13 40 11 30 9 7 20 5 10 3 1 0 -1 1978 1982 1986 1990 1994 1998 2002 2006-10 -3 REX Pesos/$ Brownsville El Paso Laredo McAllen
  • 48. Influence of Retail Sales Has Declined with NAFTA and Perhaps Higher Security605040 1978-199230 1993-2001 2001-20072010 0 El Paso Brownsville Laredo McAllen
  • 49. Border retail sales response to value of the PesoIndex, 2000:Q1 = 100, Real Peso/Dollar 160 16150 15 NEX140 14 McAllen130 13 El Paso120 12110 Brownsville 11100 10 Laredo 90 9 80 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
  • 50. The exchange rate also affects border crossingsIndex, January 2006 = 100 Pesos per dollar140 15 Nominal Exchange Rate130 14120 Truck Crossings110 13100 12 90 Vehicle 80 Crossings 11 70 10 60 50 9 2006 2007 2008 2009 2010 2011NOTE: Seasonally adjusted data.SOURCES: Texas A&M International University, Texas Center for Border Economicand Enterprise Development and Banco de Mexico.
  • 51. US-Mexico trade by top 10 land ports in 2010 (billions of U.S. $) Rank City Total Trade Share of Total (%) 1 Laredo, TX 121.3 39.0 2 El Paso, TX 55.8 17.9 3 Otay Mesa – San Ysidro, CA 31.0 9.9 4 Hidalgo, TX 22.7 7.3 5 Nogales, AZ 19.8 6.4 6 Eagle Pass, TX 16.8 5.4 7 Santa Teresa, NM 13.3 4.3 8 Brownsville – Cameron, TX 12.3 3.9 9 Calexico, CA 10.3 3.3 10 Del Rio, TX 3.1 1.0 11 Other 5.0 1.6 Total 311.3Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University
  • 52. Why Has Peso Strengthened?• Economy growing again• US continues zero interest rate policy, encouraging capital flows to Mexico• Mexico has pursued good fiscal and monetary policy• Mexico seen as part of the developing world which leads the world’s economic growth
  • 53. Fort Bliss Kept El PasoFrom Serious Recession
  • 54. Fort Bliss• Ft. Bliss continues to support the local economy, with $3.2 billion spent 2006-2009, and 40% going to local contractors.• For the 2010-2012 period, Ft. Bliss expenditures will be decline to $0.5 billion per year.• However, as the troops arrive the local stimulus shifts from construction spending to population growth.• Counting soldiers, wives, and children, from 2006 and 2012 the population associated with Ft Bliss increases by nearly 50,000.
  • 55. Cumulative Construction Spending at Ft. Bliss Will Reach $5 Billion Between 2008 and 2013$Million600050004000300020001000 0 pre- 2009 2010 2011 2012 2013 2009
  • 56. The Biggest Years for Military Construction Spending Are Now Behind Us$ Million200015001000 500 0 pre- 2009 2010 2011 2012 2013 2009
  • 57. Net Additions to Fort Bliss Population Sees a Peak in 2011 8000 15,969 7000 6000 5000 8,891 4000 7,863 7,833 Soldiers 3000 Spouses 5,006 4,072 Children 2000 1000 0 2008 2009 2010 2011 2012 2013 School Year (2008=Fall 07/Spring 08)Source: Team Bliss Base Transformation Office
  • 58. El Paso growing again, leading the U.S. The local recession was milder than elsewhere.
  • 59. El Paso outperforming the nation in the recovery El Paso US 3-Month 0.61 0.24 6-Month 1.01 0.30 12-Month 2.37 0.81 24-Month 1.66 -2.43Comparison through January 2011: employment data seasonally adjusted
  • 60. Outlook for the El Paso-Juarez Region• The U.S. economy is coming out of the worst recession in decades, recovery has gained momentum in recent months.• El Paso’s dependence on manufacturing continues. The maquiladora’s turnaround is good news for El Paso job growth.• Maquiladora recovery depends heavily on autos. Can we expect a normal cyclical recovery there?• Stimulus from Ft. Bliss continues to be strong, but the stimulus into the local economy now changes from construction spending to population growth.• The impact of the violence across the border might be sending mixed signals.
  • 61. Outlook for the El Paso-Juarez Border Region Roberto Coronado roberto.coronado@dal.frb.org 915.521.5235The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or of the Federal Reserve System. Any secondary distribution of this material is strictly prohibited. May be quoted with appropriate attribution to the author.