Austin economy on brink of $100 billion [Austin American-Statesman]
(Austin American-Statesman (TX) Via Acquire Media NewsEdge) Sept. 17--The Austin-area economy grew at one of the fastest rates in the country last year and, barring an unlikely economic meltdown, should soar past the $100 billion mark for the first time during 2013.
Fueled in part by higher exports and the area's ongoing job creation and population growth, the local gross domestic product rose to $98.7 billion in 2012, according to preliminary data released Tuesday by the U.S. Bureau of Economic Analysis.
That total, which was not adjusted for inflation, gave Austin the 32nd-largest metro-area economy in the country last year, the bureau said.
If Austin sustains its growth trajectory of the past three years, the local economy would surpass the $100 billion mark this year -- and do so with a few billion dollars to spare.
In and of itself, that threshold doesn't mean much beyond being a nice, round number, but it has value as a reflection of the area's economic vitality in recent years, said Michael Hennig, economic development program manager at the Capital Area Council of Governments.
"It is an arbitrary number, and some could easily turn to it just for its bragging value," Hennig said. "But it's important to keep in mind it really is a reflection of productive value."
In fact, after backing out the impact of inflation, a process that helps provide a clearer picture of economic growth from year to year, the Austin economy expanded by 6.5 percent in 2012 -- the 13th-fastest growth rate in the country, according to the bureau. The Texas economy grew at an inflation-adjusted rate of 4.8 percent last year.
Hennig attributed some of Austin's growth to diversification efforts established by regional business and government leaders after the tech bust in the early 2000s. And according to the federal data, a diverse set of industries contributed to the area's economic expansion in 2012.
The biggest contributions came from the financial activities sector, which added 1.37 percentage points, and the durable-goods manufacturing sector, which contributed 1.07 percentage points, according to the bureau.
The private sector appeared to deliver growth across the board last year. However, Austin's broad exposure to government activity served as a mild drag on the local economy. The public sector sapped 0.06 percentage points from Austin's economic growth during the year, the bureau said.
"(T)he challenge will be to recognize which parts of the economy are best positioned to support growth today and in the next few years, which parts of the economy need to be supported with a longer time frame in mind, and which parts of the economy are likely to stagnate," Hennig said.
The growth of local exports -- particularly for high-tech products and services -- has helped underpin Austin's economic expansion in recent years and could be increasingly vital in the years to come, according to a report by the Brookings Institution.
The Brookings analysis found that the total value of exports from the Austin metro area, when adjusted for inflation, grew an average of 7.7 percent a year from 2003 to 2012, the 30th-fastest annualized growth rate among the country's 100 largest metro areas. The region exported a local record of almost $11.5 billion of goods and services last year, Brookings said.
Roughly two-thirds of that export value came from manufactured goods, led by more than $1.9 billion worth of computer equipment shipments, the report said. Semiconductors accounted for almost $1.5 billion of Austin's export value last year.
The computers and electronics business also contributed a significant portion of the area's services exports. Royalties for those products accounted for $511 million worth of export value, Brookings said, while other information-technology royalties accounted for another $382 million.
All told, exports accounted for 12.5 percent of the area's total economic activity in 2012, Brookings said. However, their analysis also found that Austin's share of exports as part of its overall economy -- what the think tank called "export intensity" -- was only slightly higher than the 12.1 percent mark posted in 2003.
Typically, economic developers like to see export intensity increase, because it means more outside dollars coming into the local economy.
In 2003, Austin's export intensity was higher than the national average, said Brad McDearman, director of Brookings' Metropolitan Export Initiative. Exports peaked at 16.4 percent of the total Austin economy in 2006, and they held in the 14 percent range until 2009.
While the sharp drop to 11.6 percent in 2009 was largely due to the fallout of the national recession, Austin exports might have also suffered in late 2009 when Samsung scaled back production while re-fitting part of its plant in Northeast Austin.
Exports from the area have rebounded since then, Brookings found, but so did sectors that don't export goods or services.
"You're now at an all-time high for exports in Austin, and yet your (export) intensity has dropped," McDearman said. "So you're growing a lot in sectors that aren't exporting."
The area's rapid population growth spurs much of that non-traded growth, he said. A larger population requires more schools, more government services, more restaurants and a host of other goods and services that are both produced and sold within regional boundaries.
But increasing export intensity is vital because the impact of those so-called "traded industries" brings in resources that ripple throughout a local economy, said Brian Kelsey, principal of Civic Analytics, an Austin-based economic consulting firm.
Traded industries tend to pay more than non-traded industries, he said, and they have a greater multiplier effect on job and economic growth.
While the clustering of certain industries, particularly computer-related firms, might contribute to Austin's lower export intensity as local suppliers sell to larger businesses nearby, Kelsey said, even those vendors are indirectly reliant on exports.
"Exports are still driving the overall picture because the smaller companies serving the local market still rely on the larger companies exporting to the outside world," Kelsey said.
According to McDearman, such reliance on exports is likely to increase as more and more of the world's economic growth and spending power makes its way to emerging countries. Metro areas in the U.S. need to continue seeding startups and recruiting new businesses, he said, but they also need to continue helping current businesses increase their export capacity.
"When you look at the really compelling story of how growth is going in the 21st century," he said, "you can make a really strong argument that this should be a key element of your economic development efforts."
Austin's economic expansion continued unabated in 2012, but not every local resident shares in the benefits of those increases. In Thursday's American-Statesman, reporter Juan Castillo takes a look at U.S. Census Bureau data on local poverty rates, which have remained stubbornly high despite the economy's growth.
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