Mar
21

Charleston Economic Conditions Reported

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Local economic forecast shows ups and downs

By John McDermott
The Post and Courier
Friday, March 21, 2008

As the U.S. economy goes, so goes the local economy — but not necessarily in lock-step.

Most sectors of the region’s economy will continue to grow in 2008, with the Port of Charleston a notable exception, the Charleston Metro Chamber of Commerce projected Thursday at its 17th annual business outlook forum. But the chamber cautioned that the pace of growth will lag compared to that of recent years.

Businesses can expect a “modest” expansion of the economy in the months ahead as the slowdown at the national level works its way into Charleston, said Mary Graham, the chamber’s senior vice president for public policy, who presented the findings before 700 people at Charleston Place.

It’s likely that the region won’t be firing on all cylinders again until late 2009, she said.

Locally, at least, the consensus is that the economy is not in a recession, even as experts debate whether that’s the case for the nation as a whole. For example, Graham said the unemployment rate for the region is expected to stay relatively steady in the next two years and the number of new jobs should eke out small gains.

Perhaps the biggest surprise was the prediction that existing homes sales, which have been on the decline for two years, will start to turn around in 2008. At the same time, the market for newly built homes will continue to suffer.

The chamber said one of the bright spots in the economy is the tourism industry, which is expected to rack up another banner year despite rising prices for gasoline and other everyday necessities. Graham said the area’s visitor trade has demonstrated in the past that it is largely immune to broader business slowdowns.

“The tourism industry here does well when the national economy is not in a recession and when the national economy is in a recession,” she said.

Transportation

The Port of Charleston, a pillar of the regional and state economy, will experience tougher times.

Container volume is forecast to fall by 5 percent this year, then rebound slightly in 2009. This year’s projected shortfall follows an 11 percent decline in 2007.

The decline in traffic is partly tied to lingering uncertainties over the proposed terminal that the State Ports Authority is building on the former Navy base in North Charleston. Lengthy delays in expanding the port have created a lack of confidence among shippers about South Carolina’s desire and ability to grow its working waterfront, the chamber and the SPA said.

Trade also is being affected by a slowdown in port shipments tied to the housing industry.

Charleston handled the equivalent of 1.75 million 20-foot-long containers in 2007, with 1.66 million forecast for this year and 1.69 million forecast in 2009. In 2006 that number stood at 1.96 million.

Charleston International Airport, meanwhile, is basking in the glow of low-fare carrier AirTran, which helped boost passenger volume in 2007 by 20 percent after initiating local service in May. The forecast calls for a 10 percent increase in boardings this year before activity begins to levels off to a more sustainable pace in 2009.

About the forecast
The Charleston Metro Chamber of Commerce 2008 economic forecast was based on data collected by the group’s Center for Business Research and reviewed by the College of Charleston, which replaced Charleston Southern University. The forecasting method is known as time-series modeling. Each time the forecast is produced, the statistical relationships are re-estimated, but the forecast itself is determined by existing trends and relationships. The forecasting model was developed by Frank Hefner and Mark Witte, regional economists with the College of Charleston’s School of Business and Economics. The forecast is discussed with a 20-member board of local business professionals who bring real-world perspective to the numbers.

Tourism

Charleston’s long list of attractions continues to make the region a popular destination, and by all expectations 2008 will be another record year for the region’s $5.3 billion tourism industry.

Occupancy at area hotels is expected to increase again this year, for the fourth year in a row, to 73.7 percent, up slightly from 2007. The average daily room rate is forecast to be $157.40 this year, an increase of about $7.

Bill Green, director of sales for Hawthorn Suites in Charleston and a member of the chamber’s economic outlook board, said Charleston can’t avoid all of the national economic ups and downs, but it does have some natural padding working in its favor. He noted that the broad mix of natural and man-made attractions offers visitors diverse options. Also, the weak dollar is likely to make Charleston a more attractive destination for euro-toting visitors from abroad. “It’s nice to be in the hotel industry in Charleston right now,” Green said.

Labor market

Employment grew and unemployment fell in the Charleston area last year, and the chamber, citing several recent announcements of corporate expansions here, expects that trend to continue this year and next. According to the forecast, the local labor force is expected to grow a modest 0.5 percent this year and employment is expected to rise a slightly larger 0.7 percent, followed by increases next year of 1.3 percent and 1.2 percent, respectively.

“We’re still seeing it,” Graham said of job growth. “It’s not as it was, but we’re still seeing positive numbers.”

Meanwhile, despite problems in the national economy, chamber forecasters predict 441 fewer people will be unemployed in 2008, lowering the ranks of the jobless to 14,166.

Combined, the expected modest growth in the labor force and the larger predicted dip in joblessness would produce an unemployment rate for this year of 4.5 percent, down slightly from last year’s 4.6 percent rate. For next year, the forecasters see the rate edging back to the 4.6 percent level.

Inflation

Consumers and merchants won’t see much relief at the cash register.

If they haven’t already noticed, buyers of goods will notice that their bills will continue to rise this year, fueled partly by growing demand from developing countries for food products and energy. Also, the Federal Reserve has shown in recent months that it is more concerned with stimulating growth than taming inflation, according to the forecast.

With that in mind, the chamber is calling for the Charleston region’s rate of inflation, including food and energy, to register a 3.4 percent gain this year, slightly more than the 2.9 percent rate clocked for 2007.

In a repeat of 2007, that uptick essentially would erase projected gains for the area’s retailing industry, which will continue to feel the chill from the housing downdraft.

http://www.charleston.net/news/2008/mar/21/up_or_down34532/
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