The view for Sarasota.
For the last few years, I've been making annual economic forecasts in this January issue, and for the last few years they've been unreservedly optimistic. And even by mid-1998, things still looked great. The United States was riding one of the longest economic expansions of this century, with strong growth, falling unemployment and interest rates, declining rates of inflation and a steadily rising stock market.
Locally, the employment market continued to sizzle, with jobs growing faster than people were arriving to fill them - job growth was 4.1 percent, more than double our 1.6 population growth. As a result, unemployment rates hovered in the 2.5 percent range, nearly the lowest in Florida and three full points below the nation. That led to more workers coming to the metropolitan area during the day but residing elsewhere - which probably created more traffic problems, but that's a different story.
Local income trends for 1998 also present a rosy picture. Per capita personal income, adjusted by inflation, is growing here at 1.9 percent, well ahead of the state's 1.5 percent rate and even slightly edging out Orlando's 1.8 percent pace. And while the new housing market is not as hot as Orlando's, we're still averaging an 1.8 percent increase in the annual housing stock, equaling the state average. Tourism also continued very strong.
So everything locally through 1998 lived up to our glowing forecast - but some national and international economic developments are beginning to cloud the global economic skies and could even spread to sunny Florida. In July, Asian markets resumed the downward spiral they began last fall. Also, Federal Reserve Chairman Alan Greenspan surprised and disappointed the Asian markets, when, testifying before Congress, he indicated that U.S. monetary policy was primarily concerned with preventing rekindled inflation and held out no hopes of any upcoming interest rate cuts - cuts that would have vastly helped the Asian currencies. The message sent the Asian markets rumbling, which sent Wall Street tumbling. Two weeks later, President Clinton was asked to appear before a federal grand jury. This further troubled Wall Street, which troubled the Asian markets, which troubled North and South American markets.
The Asian contagion, so long dreaded by economists and financiers, had finally occurred, but Washington's attention was elsewhere. In about six weeks, the U.S. stock market went from a near-record level of 9338 points on the Dow to the 7600s, a 20 percent plunge. With the Federal Reserve's failure to lower short-term interest rates, the United States dollar rose strongly against Asian, Latin and North American currencies, particularly the Canadian dollar, which had been showing a general weakening trend for a number of years.
And what do these national and international developments mean for Sarasota? By most accounts, nothing all that terrible. President Art Wood says Northern Trust had a great banking year, with strong growth in deposits, new trust accounts and mortgage refinancing. He notes continuing strong activity throughout the county, particularly University Parkway, the I-75 corridor and South County. Wood is particularly upbeat about the downtown area, citing the new Selby Library, condominium development and the Ritz Carlton planned for the site of the old Ringling Towers.
Tim Bazell, regional manager for Huntington Mortgage in Sarasota, echoes Wood's optimism. "If you take new mortgage activity it's been a good year," he declares. "But if you add in the refinancing, it's been spectacular." He projects continued increases in mortgage activity next year, possibly as much as a 10 percent gain.
Kevin Lawler of the Sarasota Convention and Visitors Bureau sees little slowdown in the tourist sector. We did get some bad national press over the El Nino rains last winter, he notes, but tourist tax collections rose strongly through the year. Frank Tamberrino, director of the Committee for Economic Development, is also upbeat about local economic growth, including Arthur Andersen's continued expansion and new office building. Tamberrino also points out that with office space downtown getting as tight as the labor markets, more Sarasota companies are locating near I-75, and that solves a number of problems. Workers can now be drawn in from the Tampa or Fort Myers areas with more ease, and there are more office space and parking available near the interstate than in the downtown core. Tamberrino says the commercial real estate market is hot, with prices beginning to rival those in Tampa. He also notes strong growth in information technology, including for firms such as Pinnacle Towers, which supports the cellular phone business, and Wave Wireless, which links computers via small satellite dish antennas.
On the real estate front, Sharon Krueger, manager at Coldwell Banker's St. Armands office, who last January said 1997 was "the strongest market since 1980," reports that nothing changed in 1998. "This is a particularly good second home market," says Krueger, one that "offers baby boomers a good, and, moreover, a planned way, to ease into retirement."
Yet despite all the optimism, there is some unease out there. First, nationally and in Florida, consumer confidence has been falling, driven by the unstable stock market and a chaotic political situation in Washington. With 1999 national economic forecasts being revised downward by just about everyone, there has to be some cause for local concern. Several Sarasota bankers say they expect some adverse fallout here, but the amount remains to be seen. Offsetting this, however, could be increased consumer spending, with many families knocking down their monthly mortgage payments by $200 to $300 through refinancing.
And although generally good predictions prevail for the tourist season, we could see fewer Canadian visitors. Canadians are our biggest non-U.S. tourists and home owners, and they were paying over $1.53 (Canadian) for one U.S. dollar in October, a peak winter hotel/motel booking month. According to Debbie Dial, Wagner Realty's rental manager at the Runaway Bay Condos on Anna Maria Island, "Rentals are slower and many Canadians are only booking for a week where they used to come for two weeks or a month. We are holding up but it's a lot tougher." Other rental agents on Anna Maria and Longboat Key share Dial's reservations - but Anna Maria realtor Mike Norman does not. He reports that 1998 was the best sales year he's had in 25 years and rentals are continuing strong.
And what do I think? I predict that 1999 will be a solid year for Sarasota in the employment, construction and business rental markets. Banking and finance are also well positioned to take advantage of what will still be historically low interest rates throughout the year. But retail sales and some services, affected by both declining consumer confidence and fewer Canadian tourists with fewer U.S. dollars to spend, will be hard pressed to show significant gains. Partly sunny is the view from here.
Frederick R. Strobel is William G. and Marie Selby Professor of Economics, New College of the University of South Florida.
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|Title Annotation:||1999 economic forecasts|
|Author:||Strobel, Frederick R.|
|Date:||Jan 1, 1999|
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