McAllen economy finally slowing

McALLEN -- The City of Palms' once sizzling economy is simmering down.

Border crossings, retail sales and home sales are slowing in McAllen as residents and tourists cope with higher gas prices and inflation.

Retail sales have been hit the hardest with an April decline of $10 million, or about 3.7 percent of all taxable sales, according to the McAllen Chamber of Commerce.

Many retailers say they have noticed a difference at their stores in recent months.

"Our traffic is probably down by 5 percent," said Abdala Kalifa, owner of Kalifa's Western Wear in South McAllen. "Gas prices are really hurting people."

With prices for goods and freight rising, Kalifa said he has had to pass on the additional costs to customers by raising his store prices.

The sharpest decrease in traffic has been among local shoppers, not Mexican nationals, he said.

The McAllen economy had been on a steady, eight-year-long upward trend until March. Now, according to the chamber's monthly "McAllen Area Economic Pulse" report, the economy is contracting compared to the same period last year.

March and April were the first times, in as long as the chamber as been keeping track, that McAllen's monthly economic index - a bellwether based on more than 20 economic indicators - has ranked lower than the same month for the previous year.

While the actual decrease is small, less than 1 percent, it may be an indication that financial troubles plaguing the national economy are catching up to the Rio Grande Valley.

Sales at Sylvia's, an apparel store on North 10th Street, have been about the same as last year, manager Cindy Disque said.

"It hasn't been worse but it definitely hasn't been better than last year," she said. "We're hoping to meet our goals or be slightly under."

Some area cities, meanwhile, have logged gains in sales tax revenue, according to the Office of the Texas Comptroller. While Edinburg and Alamo have registered drops in sales tax revenue, Mission has actually added several retailers in the last year.

Meanwhile, a slight drop in bridge crossings this year may suggest that Mexican nationals aren't visiting here as often, said Keith Patridge, president and chief executive officer of the McAllen Economic Development Corp.

"But when they come, they are spending more money," Patridge said.

Despite the signs of economic cooling, area unemployment rates are nearly a half percentage point below those of May last year, according to the Texas Workforce Commission.

Steve Ahlenius, president and CEO of the McAllen chamber, said strong employment is a good sign the economy remains robust. Hidalgo County has added about 5,300 jobs during the last 12 months.

And while the city of McAllen is going through some economic contraction, the larger McAllen metro area is still growing, according to the Federal Reserve Bank of Dallas.

It found that Greater McAllen logged stronger economic growth in April than all of Texas' major cities.

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Kyle Arnold covers business, the economy and general assignments for The Monitor. You can reach him at (956) 683-4410.