For immediate release: September 1, 2009
Mexico's Economy, Protectionism, Texas' Economy, FDIC Premiums Subject of Dallas Fed Report
DALLAS—The latest issue of the Federal Reserve Bank of Dallas' Southwest Economy features articles on Mexico's economic troubles, protectionism's threat to the Texas economy, the state's economic performance in 2009 and rising FDIC premiums for Eleventh District banks.
Mexico's economy has been hit hard by a severe global recession and several idiosyncratic shocks, including a crackdown on drug cartels, a flu epidemic and trade disputes with the U.S., according to business economist Edward C. Skelton and senior economist and advisor Erwan Quintin in “Mexico's Año Horrible: Global Crisis Stings Economy.”
Despite the hard times, Mexico has managed to avoid a full-blown crisis, thanks to its efforts to reduce financial vulnerability and deal with several economic shocks, Skelton and Quintin say.
“Mexico's economy has been bloodied but has avoided collapse, thanks to prudent policymaking and a much improved financial system,” the authors write.
In “Rising Protectionist Threat Creates Risks for Texas,” Skelton and research analyst Mike Nicholson warn that any significant trade restrictions imposed by the U.S. or other countries, especially Latin American nations, could hurt Texas' exports.
Three industries that generate more than half of Texas' exports—computers and electronics, chemicals and machinery—have significant exporting presence in Latin America, Skelton and Nicholson state.
“All told, widespread protectionism threatens workers and could be expensive to the state in terms of forgone business activity,” the authors say. “The toll would rise if a cycle of protectionist retaliation spreads the ill effects of trade barriers to other Texas industries.”
In this quarter's “On the Record” conversation, four Dallas Fed regional economists update the state's economic performance in 2009. Highlights include:
- Employment: The current employment forecast suggests job losses in Texas will bottom out in the current quarter and then begin a gradual increase; recent changes in the Dallas Fed's Texas Leading Index suggest a mild rebound in job growth in 2010 to about 1 percent to 1.5 percent.
- Manufacturing: Recent anecdotal reports and survey data suggest the decline in Texas manufacturing has moderated; although factory output and employment are still contracting, the worst seems to be over.
- Housing: Texas homes remain affordable compared with the national average; homebuyer traffic picked up in the first half of the year.
- Energy: The Texas rig count has begun to inch up with the recent strengthening in oil prices; most indicators of energy demand remain depressed.
In “Restoring Banking's Safety Net: Deposit Insurance's Steeper Cost,” financial industry analyst Kory Killgo finds FDIC premiums rising for banks in the Eleventh Federal Reserve District—but not as much as they are for institutions in the rest of the country.
Although Eleventh District banks have higher relative levels of deposits than banks nationwide, their premium assessments are lower than assessments for banks elsewhere because of their generally stronger financial condition, according to Killgo.
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