Experts predict moderate growth for global, local economies

February 25, 2018 GMT

Lake Houston area businesses and professionals got a taste of what to expect from the 2018 economy during the Economic Outlook Luncheon at the Walden Country Club in Atascocita on Feb. 22.

The event, which was hosted by the Lake Houston Area Chamber of Commerce, featured local and national experts who projected micro and macro versions of the economy based on what happened in 2017.

Thomas Melendez, an investment officer and institutional equity portfolio manager for the Massachusetts Financial Services Company, said 2017 was a very good year for global equities. Along with Melendez giving the crowd a look on what to expect from the global economy, Greater Houston Partnership Research Director Jenny Philip explained what to look for from the local economy.

“Investors were rewarded for investing in equities rather handsomely in 2017. We saw equity markets go up, as I said rather nicely with little to no volatility, which was highly unusual,” Melendez said. “Global equities, which include the United States, were up by 24 percent, but more importantly we saw some really strong performance from markets outside of the United States.”

Melendez said emerging markets were up by about 37 percent and developed international markets like Europe, Australia and Japan are up by 25 percent.

“One of the other things that we saw in 2017 was that toward the latter part of the year, we got a real good boost in the arm as the United States passed tax reform that was going to provide tax relief for corporations and individuals,” Melendez said. “The biggest beneficiary of this were the corporations that saw the tax rate coming down from 35 percent to 21 percent.”

The amount of tax savings that is estimated for U.S. corporations is anywhere between $200 billion to $250 billion because of the tax relief, Melendez said. The investment officer also pointed out he has already seen the tax relief being distributed in the form of bonus checks to employees and possibly even raising some wages.

“There’s some really good things that are happening here in the U.S. that I think is going to have an impact that are going to provide further fiscal opportunities for investors and individuals,” Melendez said.

Philip said the Greater Houston area’s growth is tied to the global economy.

“Houston is a global city. The growth of Houston completely depends on the U.S. economy and the world economy, especially when energy is flat,” Philip said. “So from 2010 to 2014 while the U.S. economy and the world economy was trying to get out of the financial recession, Houston benefitted from hydraulic fracturing coupled with directional drilling. So we saw this immense growth in shale (gas) plays and so that’s what brought us out of the recession.”

Philip said a big part of what drives the Houston economy is population growth. There’s a lot of population based industries that thrive in the city, like education and health care, she said.

The long term average of Houston’s employment growth is about 55,000 to 65,000, she said. Philip said residents can expect Houston to add between 45,000 to 50,000.

“The important thing about forecast is not to put all of your focus on that point estimate and say, ‘Oh, you’re off by 200, 300 jobs’ it’s understanding the underline trends that drive that forecast and how you take that information and apply it to your business decisions,” Philip said.