Alaskanomics

Join the Conversation on Alaska’s Economy at Northrim Bank’s annual Economic Luncheons April 3rd and 4th

Declining oil production continues to be an important concern for Alaska’s future, especially as we watch the dramatic increases in production in Texas and North Dakota.  Alaska has become an expensive place to conduct oil and gas business, as well as risky for new investments due to our current tax structure.  With legislation for reform currently on the floor in Juneau, there are opportunities and challenges to stabilize the tax structure and make Alaska competitive once again.  Alaskanomics invites you to join the conversation at Northrim Bank’s informative Economic Luncheons, in Fairbanks on April 3 and Anchorage on April 4.  Mark Edwards, Alaskanomics author and Northrim Bank economist, will provide an update on the Alaska economy, followed by a special presentation by Bob Heinrich, Vice President Finance with ConocoPhillips, discussing the challenges and opportunities facing the oil and gas industry in Alaska. 

Please RSVP using the links below if you would like to attend these free events, sponsored and hosted by Northrim Bank.  Seating is limited.

Fairbanks Economic Luncheon April 3

Anchorage Economic Luncheon April 4

U.S. Oil Production at Highest Level since 1992: Alaska’s contribution drops to less than 8%

By Blythe Campbell
Director of Communications and Marketing
NANA Development

The U.S. Energy Information Administration (EIA) reported U.S. crude oil production for the end of 2012 averaged 7 million barrels per day, the highest since December of 1992. The EIA attributed the milestone to increasing oil production in North Dakota and onshore Texas.

Texas now produces more than 30% of the nation’s crude oil, and North Dakota’s production is nearly 11% of U.S. totals. Alaska’s production is now under 8% of the U.S. total, down from a high of 26% in December of 1989. At that time, Alaska’s production was higher than Texas, at 1.9 million barrels per day and 26% of the U.S. total.

As the chart shows, both Texas and North Dakota have dramatically increased oil production over the last several years as Alaska’s continues to decline.

Anchorage Inflation Stable at 2%

According to the Federal Bureau of Labor Statistics, the Consumer Price Index (CPI) in Anchorage rose 2% in 2012.  Anchorage is the only "urban" community in Alaska that is tracked for these national statistics which come out twice a year.  It measures the price of a consistent “basket of goods” over time that comprises typical household spending.  Therefore, expenses for housing are weighted the highest as percentage of the average person’s income, followed by energy and food. 

The 2% increase over the last 12 months is slightly lower than Anchorage's 10 year average inflation rate of 2.7%.  Average prices have not shown much volatility during the decade.  The largest rate of change was 4.6% in 2008 when gasoline prices rose dramatically and the low was 1.2% in 2009, mainly due to flat housing prices. 

The largest price increase in the past 12 months in Anchorage was seen in medical care (+4.4%), apparel (+4.1%), housing (+3%), food (+1.1%), and transportation (+1.1%).  Price declines were measured in three major categories.  Energy decreased 2%, mainly due to a pullback in gasoline prices.  Education and communications was 1.1% lower and recreation fell 0.2%.

Nationwide, inflation has been low, increasing only 1.7% in 2012.  The largest increases have been in medical care (+3.7%), transportation (+2.6%), housing (+2.2%), food (+1.8%) and apparel (+1.8%). 

The most significant differences from Anchorage compared to the nationwide average are gasoline prices rose slightly in the U.S., up 0.5%, and housing costs in the U.S. have been increasing at slower rate than in Alaska.  These are the two largest expenses in the average person’s monthly budget, so they will have the largest impact.

Video: 2013 Alaska Construction Spending Forecast

Associated General Contractors Executive Director John MacKinnon and Economist Scott Goldsmith from UAA’s Institute of Social and Economic Research discuss expected Alaska construction spending in 2013 during the recent Associated General Contractors annual Alaska Construction Spending Forecast.

According to the forecast, construction spending in Alaska in 2013 is estimated to be about $8.4 billion, up 8 percent from spending in 2012. Increased spending in the oil and gas sector will account for most of this growth. Spending in this sector is expected to be up 13 percent, from $3.2 billion last year to $3.6 billion in 2013. Also adding to expected growth, a large state capital budget for fiscal year 2013 and $453 million in general obligation bonds that voters approved for transportation projects in the November 2012 election.

 

Click here to download the full construction spending forecast.
Research and printing underwritten by Northrim Bank.

Alaska foreclosure and delinquency rates remain low through 2012

Alaska continues to have some of the lowest levels of foreclosures and delinquent residential mortgage loans in the United States according to the Mortgage Bankers Association fourth quarter 2012 survey. Alaska ranked third best in the nation in both foreclosures and delinquencies of all loan types.

The total inventory of foreclosures in process is 1.1% in Alaska, while the country has a much larger lingering foreclosure inventory at 3.7% due to higher rates during the recession and longer resolution times. Alaska foreclosure rates remain unchanged year-over-year, while U.S. foreclosure rates have dropped from 4.4% one year ago.

Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska is third best behind North Dakota and South Dakota in the overall level of delinquent loans. Alaska’s delinquency rate is 3.7%, while the U.S. average is 7.5% for all loan types. This is an improvement for Alaska from 4.3% one year ago. The U.S. delinquency rate has also come down from 8.2% last year.

Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The Mortgage Bankers Association survey covers 94,347 mortgages in Alaska. 6,670 or 7% were considered subprime, compared to 10% nationally. The rate of delinquencies and foreclosures on subprime loans is significantly higher. However, Alaska is in a far better position and again leads the nation as having the lowest level of foreclosures and delinquencies in this important category. Subprime foreclosures in Alaska are at 2.9% while the national average is 11.9%. Alaska’s subprime delinquency rate is 10% compared to the national average of 21.3%.

2013 Alaska Construction Spending Forecast Released; Spending Up 8%

The Associated General Contractors of Alaska released its annual construction spending forecast prepared by Scott Goldsmith and Mouhcine Guettabi of the University of Alaska’s Institute of Social and Economic Research. The report provides an informative review and estimate of construction activity in Alaska for 2013.

According to the forecast, construction spending in Alaska in 2013 is estimated to be about $8.4 billion, up 8 percent from spending in 2012. Increased spending in the oil and gas sector will account for most of this growth. Spending in this sector is expected to be up 13 percent, from $3.2 billion last year to $3.6 billion in 2013. Also adding to expected growth, a large state capital budget for fiscal year 2013 and $453 million in general obligation bonds that voters approved for transportation projects in the November 2012 election.

Click Here to download the full forecast.

Research and printing underwritten by Northrim Bank.