Phoenix MSA Third Quarter 2024 Forecast Flash

Aug. 8, 2024

By George W. Hammond, EBRC director and Eller research professor

Phoenix continues to generate strong gains

This post briefly describes the Phoenix MSA Third Quarter 2024 forecast update, completed in August 2024. Keep in mind that the Phoenix forecasts now include projections for both Maricopa and Pinal counties.

The detailed 30-year forecast data are available in Eviews and Excel files on the Forecast Databases page.

This forecast incorporates updated national projections from S&P Global released in July 2024.

The U.S. baseline forecast assumes a soft landing for the U.S. economy. On a quarterly basis, the forecast calls for real GDP to increase through 2054 (no recession).

For the current U.S. and Phoenix forecasts, the baseline projections are assigned a 55% probability. The pessimistic scenario has a 25% probability, and the optimistic scenario has a 20% probability.

Phoenix MSA growth is projected to slow as the economy adjusts to slowing national growth.

The baseline forecast calls for Phoenix job growth to drop from 3.0% in 2023 to 2.6% in 2024 and again to 2.3% in 2025, reflecting slower national gains.

Net migration drove Phoenix population gains last year, which translated into 1.8% growth. Population gains slow to 1.6% in 2024 and 1.5% in 2025, as slower job growth and reduced housing affordability impact mobility.

Housing permits rise from 45,616 in 2023 (revised actual) to 48,727 in 2024, then drop to 44,926 in 2025. This reflects slowing population gains and reduced housing affordability. Thereafter housing permit activity gradually descends to a level consistent with population gains.

Nominal personal income growth is forecast to accelerate to 6.5% in 2023 (historical data ends in 2022 for counties and metropolitan areas) and remain in the 6.2%-6.3% range through 2027.

Real retail sales (broadly defined to include retail, food, restaurants and bars, and gas) is expected to drop in 2024 (down 1.6% from 2023) then gradually accelerate through 2027.

The pessimistic scenario assumes a modest national downturn during the second half of 2024, driven by tightening lending standards by banks, which restrict consumer and business spending, as well as continued problems arising from the Russian invasion of Ukraine and conflict in the Middle East. This generates slower growth in Phoenix as well. The optimistic scenario assumes gains faster than expected under the baseline.

Exhibit 1 presents a summary of the current annual projections. Exhibit 2 provides a comparison to the prior forecast. Exhibit 3 provides a comparison of the baseline and alternative scenarios for the current forecast.