2015 could be the year we see some significant improvement in metro Atlanta and Georgia’s economy, according to Kennesaw State University Professor of Economics Roger Tutterow. Tutterow was the keynote speaker at a Tuesday conference presented by Partnership Gwinnett, the economic development arm of the Gwinnett Chamber of Commerce.
Despite the fact that the recession that began in late 2007 was declared over in June 2009, economic growth has been slow to increase. Since 2009, the economy has grown at about a 2% annual rate, compared to more typical 4% annual increases seen following previous recessions. Things appeared to be turning up in late 2013, as manufacturers boosted inventories, however output fell by 2.1% in the first quarter of 2014, partially due to poor weather, but more because of manufacturing cut back following an inventory buildup in the second half of 2013.
According to Tutterow, this year’s poor first quarter means 2014 annual GDP growth will run at 2.4%. For 2015, he predicts better news with economic growth of 2.6 to 2.7%. That’s slightly less than a growth rate of 3% predicted by Atlanta Federal Reserve President Dennis Lockhart, who addressed the annual meeting of the Council for Quality Growth on Monday.
Another key economic factor to consider is the level of interest rates. Following a credit crunch in mid-2007, the Fed began lowering interest rates, eventually getting its Federal Funds Rate effectively to zero by late 2008, six years ago next week. Both Tutterow and Lockhart predict that interest rates could start to increase again in May or June of 2015. Lockhart emphasized that increases will come slowly, perhaps only by 25 basis points per quarter, and could take several years to get to a more normal 3 3/4 or 4% Federal Funds Rate.
Tutterow noted several reasons to be optimistic about the direction of the economy, both nationally and locally. He noted the improvement in consumer confidence as measured by the Conference Board, saying it finally crossed into positive territory in October. In addition, manufacturing is increasing in Georgia and the Southeast, as measured by the Purchasing Manufacturer’s Index. He credits the growth in manufacturing to cheaper energy prices and the cost of labor. Rising wages in Asia are increasing the costs of manufacturing goods overseas, causing companies to bring manufacturing back to the United States.
Metro Atlanta and Georgia’s economy was closely tied to residential real estate prior to the 2007 recession. A slow recovery in that sector means that it will be several more months before the Peach State returns to the 2007 employment level. Financial institutions that were affected by the housing bubble and increased regulations imposed by Dodd Frank have largely recovered, and are ready to loan money again. New home sales, which in Georgia had dropped 93% from their pre-recession peak are increasing.
While metro Atlanta is expected to continue to outpace the growth rate seen in the rest of the country, it won’t be at the rate seen during the 20 years prior to the recession. While much of the state’s economy during that time was driven by the housing market, as Tutterow sees it, the challenge over the next few years will be to properly manage future growth and to build an economy based on producing products that can be exported outside Georgia. That in turn will create a more stable local economy and wealth within the region.