Report: Phoenix's $398B economy puts it behind Hong Kong

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(The Center Square) - The Phoenix metro area has the 43rd largest economy in the world, according to a new report.

The report by Common Sense Institute Arizona found that the city's economy is $398 billion, ranking it behind Romania and Hong Kong. The Phoenix metro area’s economy is bigger than Chile’s, the Czech Republic’s and Egypt’s, the report said.

The Phoenix area has grown “very quickly” over the last 10 years, said Glenn Farley, the CSI’s director of policy and research.

He added that the city, in terms of economic output, has gone from a “below-average income jurisdiction” to a “high-income jurisdiction.”

Many people started moving to Phoenix in the 1990s and early 2000s, Farley told The Center Square.

Phoenix’s population did not grow “particularly fast” until 2015, when Phoenix started to attract a lot of people moving to the city, he said.

Farley said Phoenix’s consumer spending base has increased 64% since the pandemic, more than double the average for a major metropolitan area, which is 27%.

The report found that the city’s retail base is America’s 10th largest, with nearly $164 billion in sales, up from 34th place in 1970.

The two fastest growing components of the Phoenix metro area since the pandemic, according to Farley, are its consumer spending and housing prices.

However, as housing in Phoenix has become less affordable and more constrained, the city risks losing momentum in its economic growth, Farley told The Center Square.

As of September, the report stated that Zillow found a typical Phoenix home value of $447,000, ranking Phoenix as the “104th most expensive typical home price in the country.”

CSI’s report noted Phoenix has “been able to keep housing prices relatively reasonable compared to other metro areas,” which is a “positive sign for the future” of the city.

According to Farley, housing plays an important role in determining whether Phoenix can expand its consumer base. He added that “affordable housing” is required to “sustain flows” of people moving to the area.

Farley said over the last five years, housing prices in Phoenix have increased. These “runaway housing prices” risk outpacing the city’s economic growth and ability to “absorb those with higher incomes,” he stated.

If home prices don’t come down or incomes keep increasing, people may stop moving to the area, Farley noted, adding that this would slow the growth rates Phoenix has seen over the last 10 years.

Arizona does many things well, such as having a competitive tax structure and business-friendly regulations, but the state struggles to build housing “quickly and cheaply,” Farley said.

A reason Arizona struggles with this, he stated, is regulatory barriers at the city level.

The evidence of the last five years suggests that if Arizona cities are “left to do their own thing,” it is “unlikely they’ll be able to permit enough housing or cheap enough housing to solve this problem on their own,” Farley stated.

CSI released a report earlier this year showing Arizona will never be able to close its housing deficit, The Center Square reported. The report found that Arizona faced a housing deficit of 56,047 units in the first quarter of fiscal year 2025.