Contact:
Bruce Brooks
404-651-2645
[email protected]
According to Georgia State University's latest quarterly economic forecast, the U.S. economy will continue to sail through the economic mine-field of lost Asian sales, recessionary tendencies in Brazil, and increasing credit constraints from money center banks in the United States. Dr. Ratajczak's latest forecast shows the U.S. economy expanding 2.6 percent in 1999 and 2.5 percent in 2000. Reduced interest rate targets by the Federal Reserve and strong capital spending are helping to offset the domestic effects of international market weakness and international banking problems.
Inflation should remain under control. Consumer prices are projected to rise a modest 2.3 percent in 1999 and 2.7 percent in 2000. National manufacturing employment is expected to decline by 334,000 jobs during the next two years. Stock prices are expected to resume their rise with the Dow Jones index surpassing the 10,000 mark in 2000. Even so, returns will cool from the 16 percent gains of 1998, with investors experiencing annual gains of less than 10 percent in each of the next two years.
Consumer spending gains will slow from 5 percent during 1998 to gains of only 3.4 percent and 2.7 percent in the next two years respectively. Auto and truck sales should grow slowly from 15.1 million units this year to 15.3 units by 2000. Housing starts will slow from 1.583 million in 1998 to 1.529 million in 1999 and 1.476 million in 2000. Mortgage rates should fall below 6.5 percent in 1999 before rising to 6.7 percent in 2000.
In Georgia, the population is growing at a faster percentage rate than all other states except Nevada and Arizona. However, personal income growth has not kept pace. As a result, Georgia's per capita income is increasing more slowly than the national average. Job growth is also slowing, with only 77,500 new jobs projected for 1999 and 69,000 new jobs during 2000. Gross state product should slow from 4.5 percent gains in 1998 to more modest increases of 3.0 percent and 2.7 percent in the next two years respectively.
Georgia's employment should expand by 2.8 percent in 1998 before weakness in nondurables and slower growth in financial services and business services lower employment gains to only 2.1 percent in 1999. Even more modest employment gains of 1.8 percent are expected in 2000. Atlanta's employment gains should be 3.2 percent in 1998, 2.4 percent in 1999, and only 2.0 percent in 2000. Strong growth in retail activity and some rebound in manufacturing is expected to begin pushing employment gains higher later in 2000. Thus, no recession should materialize during the next two years.
Georgia's budget position is the best in thirty years. All the reserves are fully funded and the current fiscal year's projected revenue gains of 6.5 percent should permit retention of those reserves. Slower revenue growth is projected for the next two fiscal years as employment gains slow and capital gains become less ample. Still, revenue gains of 6 percent per year are anticipated for the next two fiscal years. Combined with a low inflationary environment, these revenue gains should enable new spending or tax initiatives.
Atlanta's economy is expected to grow more slowly. Following 63,600 new jobs in 1998, job gains should slow to only 48,900 in 1999 and 41,100 in 2000. Housing permits should fall by 8.1 percent in 1999 and a further 5.2 percent in 2000. Population gains will gradually decline from the over 3 percent gains experienced during most of the past decade to only 2..6 percent gains in 2000.
A definite slowing in the growth of the U.S., Georgia, and Atlanta economies is expected. However, the economic factors that lead to recession appear to be adequately restrained. Therefore, the outlook remains favorable for employment gains with low inflation and low interest rates during the next two years.
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