Texas economy continues to show stregnth, despite nationwide contraction

Texas maintained its economic resilience in the first quarter of 2025 even as the national economy contracted and 39 states saw their gross domestic product shrink, according to data released Thursday by the Bureau of Economic Analysis.

While the U.S. economy declined 0.5% on an annualized basis in the first quarter, Texas — the nation’s second-largest economy with $2.7 trillion in annual GDP — was among just 11 states to avoid a contraction in inflation-adjusted economic output.

The quarterly state data underscored Texas’ economic strength in sectors that helped buffer the broader national downturn. Personal income increased in all 50 states and the District of Columbia, with the percent change ranging from 12.7 percent at an annual rate in North Dakota to 3.2 percent in Washington state, though specific Texas figures weren’t immediately available in the preliminary data.

Real GDP decreased in 39 states in the first quarter of 2025, with the percent change ranging from 1.7 percent at an annual rate in South Carolina to –6.1 percent in Iowa and Nebraska. Agricultural states bore the brunt of the economic pain, with farming-dependent Iowa and Nebraska posting the steepest declines.

The national economic picture reflected significant sector-wide challenges. Finance and insurance, which decreased in all 50 states and the District of Columbia, was the leading contributor to decreases in 18 states. The struggling agricultural sector contributed to declines in 11 states, while mining difficulties affected eight states.

Texas, as part of the Southwest region that includes Arizona, New Mexico and Oklahoma, has historically shown economic durability due to its diversified industrial base spanning energy, technology, agriculture and manufacturing. The state’s energy sector, particularly oil and gas production, has provided economic stability even during national economic volatility.

Current-dollar GDP increased in 47 states and the District of Columbia, with the percent change ranging from 8.7 percent at an annual rate in North Dakota to –2.7 percent in Iowa. The difference between inflation-adjusted and current-dollar figures highlighted the ongoing impact of price pressures across the economy.

The first quarter’s economic performance comes as businesses and consumers grappled with elevated costs and shifting federal policies affecting trade and government spending patterns.

Personal income increased $407.3 billion, or 6.7 percent at an annual rate nationally, driven by gains in earnings, government transfer payments and investment income. The income growth provided some consumer spending power despite the broader economic headwinds.

Looking ahead, economists will watch whether Texas can maintain its relative economic advantage as the Federal Reserve continues to navigate inflation pressures and potential interest rate adjustments that could affect the state’s key energy and technology sectors.

The Bureau of Economic Analysis will release second-quarter 2025 state economic data on Sept. 26, combining GDP and personal income statistics with consumption data in a new consolidated report format.