Global oil and natural gas prices declined in the second quarter of the year, likely reducing GDP growth in the West South Central Division (Texas, Louisiana, Oklahoma, Arkansas). However, a rush of tourism across the South largely made up for that drop, with the South trailing only the Northeast in GDP growth. GDP growth in the South Atlantic Division (Delaware, D.C., Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia) was particularly strong in Q2 with the popularity of spots in Florida, Georgia, South Carolina and Virginia as summer vacation destinations for travelers. According to data from the Visa International Travel platform (VISIT), the only two cities in the U.S. with an increase in international visitors from Q2-2019 to Q2-2022 were West Palm Beach, FL and Austin, TX. While Hurricane Ian certainly had a strong negative impact on travel at the end of Q3, our analysis suggests that the South will lead the nation in both employment and GDP growth in the second half of 2022, thanks to a strong tourism sector and high demand for oil and gas from Europe.
Compared to other parts of the U.S., the outlook for 2023 is relatively strong for the South despite expected declines in the housing construction and manufacturing sectors (Figure 5†). The housing sector decline will likely impact the South Atlantic and the West South Central the most, while the East South Central (Alabama, Kentucky, Mississippi, Tennessee) will be disproportionately impacted by the decline in auto manufacturing. However, thanks to expectations for higher oil and natural gas prices, along with very strong demand for energy from Europe, the West South Central’s energy industry will provide a boon to the region throughout most of 2023. Additionally, the South has a high concentration of its employment and GDP in the government sector, which is likely to be mostly spared from a 2023 slowdown. That, in addition to favorable net-migration trends and a widespread business-friendly environment, should allow the South to lead the nation in GDP, consumer spending and job growth in 2023.