Tucson MSA Second Quarter 2024 Forecast Flash

May 7, 2024

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

Tucson generates steady gains in latest forecast

This post briefly describes the Tucson MSA Second Quarter 2024 forecast update, completed in May 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 April 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 decelerate as the economy adjusts to slowing national growth.

Tucson job growth is forecast to decelerate from 1.6% in 2023 to 1.4% in 2024 and 2025, reflecting slowing national gains.

Net migration drove Tucson population gains last year, translating into 0.7% growth. Population growth is forecast to slow modestly to 0.6% per year in 2024 and 2025.

Housing permits are forecast to rise from 5,255 (preliminary actual) in 2023 to 5,383 in 2024, then drop to 3,940 in 2025 due to slow population growth and reduced affordability.

Tucson personal income growth is forecast to accelerate to 5.2% in 2023 (historical data ends in 2022 for counties and metropolitan areas), rise slightly to 5.3% in 2024, then accelerate to 5.9% in 2025.

Real retail sales (broadly defined to include retail, food, restaurants and bars, and gas) are forecast to decline in 2024 (down 0.4%) and then gradually pick up steam through 2027.

The pessimistic scenario assumes a modest national downturn during the middle 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.