More than 1,000 business leaders from across the state turned out Tuesday to hear about prospects for the economy in 2006.
They were treated to a fair bit of good news at the forum put on by the North Carolina Bankers Association and North Carolina Citizens for Business and Industry.
“All things considered, it is certainly not sluggish,” said Harry Davis, a professor at Appalachian State University and chief economist for the North Carolina Bankers Association, about the economy. Pointing to national growth of 4.1 percent, he stressed that corporate profits were up, the economy is adding 200,000 jobs a month, and inflation is under control.
Growth has exceeded 3 percent for 13 consecutive quarters, he added, “something we didn’t do in the 1990s.”
All that good news comes despite oil going from $41 to $69 and also the impact of the Gulf Coast hurricanes.
“Energy prices hit a point we had only dreamed about,” said U.S. Senator Richard Burr. Fortunately, he added, the country was able to shake off the impact of the price surge and the costs of the storms, such as Katrina. “We had the right economic policies in place to encourage growth,” Burr said.
Looking to the New Year, Ken Thompson, chief executive officer of Wachovia, said businesses would drive growth in 2006, not consumers.
“I expect gross domestic product growth to slow a bit,” he said, but added “it would continue to be healthy, above 3 percent.” Consumer spending will slow and “demand has dampened a bit” for consumer loans due in large part to energy prices.
However, Thompson added, “We’ve seen business loans on the uptick for the last four months. We see increased capital spending and increased investing to meet demand both locally and globally.”
Davis concurred, stressing that “The corporate sector is flush with cash.” In a brief interview with reporters after the program, he noted that companies “are already spending” on more research and development.
Helping businesses increase spending is the fact that credit is available, Thompson said. “There’s plenty of it. In fact, it’s a borrower’s market. You see a very sunny outlook not just for North Carolina but the entire country.”
In his remarks touting the economy, Davis cited a whole list of other encouraging numbers, from improvements in worker productivity to household net worth setting a record of $51.1 trillion in the third quarter. Housing sales set records in 2005 as well.
“Housing prices will slow in 2006,” he predicted, but he also stressed there is no “housing bubble” in North Carolina.
Thompson agreed on the housing situation, saying “I absolutely do not expect a crash” and that he “is just not seeing (a slowdown) yet”.
Compared to the rest of the world, Davis stressed that “The U.S. economy is growing faster than all others but China.” And he noted unemployment at 5 percent represents “pretty much full employment” in the U.S.
Moving into 2006, Davis expressed concerns about the expense of federal social programs, the federal deficit, record trade deficits and energy prices. Thompson expressed similar concerns and stressed international competition for jobs. But both believe the year will be another of growth.
Davis did note in remarks to reporters that he is a bit concerned about the markets.
“The stock market was flat last year,” he said. “That’s a potential drag on the economy.”
However, Wall Street roared out of the gates on the year’s first day of trading. The Dow closed up nearly 130 points at 10,847.41, and Nasdaq climbed 38 points to finish at 2243.74.
Looking at North Carolina, Davis said the state added 87,000 jobs through the end of November and grew at 3.5 percent. He believes in 2006 the state “will be a little slower than the national” average at 2.75 percent. Still, he expects the state to again add a net of 80,000 jobs and unemployment to stay between 5 and 5.5 percent.
North Carolina State Treasurer Richard Moore, the other speaker, told the crowd that 2005 was “a pretty good one for state government” with revenues up more than 6 percent. But he devoted most of his remarks to a call for an increase of $1 an hour in the minimum wage to $6.15.