Tucson MSA First Quarter 2024 Forecast Flash

Feb. 7, 2024

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

Tucson growth stabilizes at solid pace

This post briefly describes the Tucson MSA First Quarter 2024 forecast update, completed in February 2024.

The detailed 10-year forecast data are available in Eviews and Excel files on the Forecast Databases page.

This forecast incorporates updated national 10-year projections from S&P Global released in January 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 2033 (no recession).

For the current U.S. and Tucson forecasts, the baseline projections are assigned a 55% probability. The pessimistic scenario has a 30% probability, and the optimistic scenario has a 15% probability.

Tucson MSA growth is projected to stabilize as the economy adjusts to rising interest rates, the end of federal pandemic income support, and slumping national growth.

Job growth decelerated from 3.2% in 2022 to 1.4% in 2023 (preliminary actual). The forecast calls for growth to stabilize at 1.4% per year in 2024 and 2025.

Net migration drove population gains last year, with Tucson adding 8,000 residents by July 1, 2023, translating into 0.7% growth. Population growth is forecast to stabilize at 0.7% per year in 2024 and 2025.

Housing permits fell from 5,714 in 2022 to 5,171 in 2023 (preliminary actual). The forecast calls for permits to fall again to 4,998 in 2024 due to slow population growth, higher interest rates, and reduced affordability.

Tucson personal income growth decelerated to 3.5% in 2022, down from a revised 7.3% in 2021, reflecting the end of federal income support related to the pandemic. Nominal personal income growth is expected to increase 5.1% in 2023 and 5.5% in 2024.

Real retail sales (broadly defined to include retail, food, restaurants and bars, and gas) are expected to drop by 1.3% in 2023, stabilize in 2024, and rise by 1.8% in 2025. Nominal retail sales are forecast to rise by 2.9% in 2023 and 3.1% in 2024.

The pessimistic scenario assumes a modest national downturn during the first 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 Arizona 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.