Energy, manufacturing fuel U.S. cities' economic growth: study

Reuters News
Posted: Jul 19, 2012 7:01 AM
Energy, manufacturing fuel U.S. cities' economic growth: study

By Lisa Lambert

(Reuters) - Cities will be leading contributors to U.S. economic expansion over the next year, and much of their growth will depend on energy and manufacturing, according to a study released by the U.S. Conference of Mayors on Thursday.

"The timing and pace of recovery will be varied across the states and metropolitan areas," the study, conducted by independent firm IHS Global Insight, found. "Metro areas that didn't suffer and those whose economies are rooted in quickly growing or rebounding industries will likely recover before those with greater exposure to the acute economic turmoil."

Over the last couple of years, a boom in natural gas has brought newfound wealth to many places, while the chemicals used to extract it have raised the ire of environmental groups. Meanwhile, once-foundering manufacturing has developed strength after federal intervention in the automobile industry.

"There is unevenness across the country. It's a function of what sectors are high performers and how those sectors are tied to the local communities," Philadelphia Mayor Michael Nutter said in an interview. "We need a broader-based recovery."

The study forecast the nation's real Gross Domestic Product will grow at 2 percent in 2012 and the country's 363 metropolitan areas will see their GDP grow an average of about 1.8 percent. According to the federal government, the economy grew at a 1.9 percent annual rate in the first quarter.

A metropolitan area is typically defined as a city and its surrounding suburbs.

Five metropolitan areas will likely see real growth of more than 7 percent - Lafayette, Louisiana; Odessa, Texas; Columbus and Elkhart-Goshen, Indiana; and Bismarck, North Dakota.

Bismarck will benefit from the Bakken shale oil formation that stretches down from Canada, while Lafayette and Odessa will also share in the boons of natural resources, the study said.

In general, the firm found the chemicals industry is now "a key driver of economic growth across a large number of metros."

"The industry surge this decade in investment, jobs and incomes has been largely spurred by low natural gas prices, a result of the rapid incorporation of new drilling techniques to extract shale and other unconventional gas supplies," it said.

Meanwhile, the Indiana cities will grow from the "resurgent manufacturing sector."

"Since the end of the recession - during which inventories were short and payrolls fell drastically - firms have called back workers and expanded operations as the recovering economy has demanded a greater supply of manufactured goods," the report said, with Elkhart-Goshen riding a wave of recreational vehicle production and Columbus expanding advanced manufacturing.

Overall, 50 areas will achieve growth rates of 3 percent or more in 2012, while more than 110 metros will see growth rates of at least 2 percent, it found.

In the decade encompassing 2001 to 2011, Midland, Texas, had the highest annual average growth rate with 9.1 percent. Flint, Michigan, had the only annual contraction, averaging -0.1 percent in its growth rate, according to IHS.

"Cities and metropolitan areas are where the economy of the United States takes place," said Nutter, who heads the mayors' group.

Metropolitan areas are home to 84 percent of the U.S. population, 85.8 percent of jobs, 90 percent of wage and salary income and 91 percent of the country's real GDP, IHS found.

(Reporting By Lisa Lambert; Editing by Phil Berlowitz)