An economist with the N.C. Bankers Association presented a largely promising outlook for the state last week during the 12th annual Economic Forecast Forum.
“I’m pretty positive,” said Harry Davis, who is also a professor of banking at Appalachian State University. “I think this will be a better year.”
Davis singled out positive and negative factors in his forecast of North Carolina’s economic prospects before an audience of mostly bankers and other business leaders at the Sheraton Imperial Hotel and Convention Center on Monday.
Economic recovery has reached 4 1/2 years, which he called a “very long time in historical standards.”
Growth proved slow in the fourth quarter of 2013, probably less than 3 percent, he said.
“What that means is, during the second half of last year, the economy got close to growing around 3 percent and is certainly going to have grown faster than the previous two years,” Davis said.
“All that’s very good for the economy. The numbers are clearly getting better.”
Economic growth is measured as the annual percent change of gross domestic product. Economists tend to agree that the ideal GDP growth rate is above 2 percent but less than 4 percent.
Davis predicted that the growth rate wouldn’t accelerate to 3.5 percent, but it should reach the 3 percent level over the coming 12 months.
Consumer spending lags
On a negative note, the rate of growth of consumer spending stands at only about 2 percent, according to Davis. He said it needs to grow at a clip of 3 percent to 3.5 percent for the nation to experience growth in the economy.
“This is simply not fast enough. It needs to increase,” he said. “Per capita after-tax income and weekly earnings are flat, and they have been flat for two years.”
Since 2008, he said, real median household income has remained down, at 3.5 percent. An economic recession will normally cause household incomes to decrease, often by as much as 10 percent.
According to figures from the Census American Community Survey, the median household income for the United States was $51,371 in 2012, the latest data available.
“It had been very flat since 2000 until we got to the recession, then fell off a cliff,” Davis said. “Since then, it has been pretty flat and has only been going up the last couple of months.
“It is improving, so that’s a good thing. Still, we’ve got quite a way to get where we were prior to the recession.”
Davis told the audience that the Institute for Supply Management’s Manufacturing Index has been up six of the past seven months. The median projection of 57.3 in November was the highest rate since April 2011. He noted that it needs to be above 50 for the manufacturing sector to grow.
“That’s very good for the economy,” he said. “It’s driven somewhat by lower energy prices. The manufacturing sector in the United States is actually having a comeback.”
Mining and manufacturing, which have both improved significantly over the last year, are driving the industrial production sector of the economy.
Existing home sales have been going up since 2010, he said, and the national unemployment rate fell to 7 percent in November – the lowest in five years.
“That’s a very good thing for the future,” Davis said.
SOURCE: Business Buzz