What’s ahead for North Carolina’s economy?
“For the year, the (NCSU) Index also moved very modestly on trend, suggesting the current rate of economic growth in the state will continue in 2016,” says NCSU Economist Dr. Michael Walden.
However, if the dollar continues to strengthen the state’s manufacturing sector may take a hit. And that could be bad news for North Carolina in general.
The state remains heavily reliant on the manufacturing sector for economic growth, ranking ninth nationally based on manufacturing as share of state GDP, according to a recent report from the N.C. Department of Commerce.
Walden issued his latest index on Friday, and he sees a mix of good news as well as a warning of a possible continued slump in manufacturing.
“The Index changed little in November, dropping 1%,” Walden reports. “The largest change among the components was in the volatile building permits measure, which fell over 20%. Other components were mixed.
“For the year, the Index also moved very modestly on trend, suggesting the current rate of economic growth in the state will continue in 2016.”
Then came the warning.
“Attention should be focused on the very important manufacturing sector, which contracted in 2015 and may slump further in 2016 if the dollar’s international value continues to rise,” he says.
Earlier in the week, Wells Fargo economist painted a pretty positive view of the year ahead, forecasting an increase of over 100,000 jobs.
The NCSU Index of North Carolina Leading Economic Indicators is based on a variety of statistics and is used to create a forecast for the economy over the next four to six months.
Outside of the building permits component, Walden noted that the others “were mixed, with the national index, initial jobless claims, and manufacturing earnings improving, while manufacturing hours fell.
“All year the Index showed little movement, suggesting economic growth will continue in 2016 at the current rate,” he adds.
What’s the problem with a stronger dollar?
“Exports drop when the dollar’s value rises, so concerns about a contraction in the state’s factory output will be on the list of issues in the new year,” he says.
Here’s a look at the index and each component followed by an explanation of terms:
Chg. from prev. month, Chg. from prev. year:
- INDEX: -1.0%; -4.0%
- ECRI-WLI: 0.8%; -1.0%
- Claims: -4.3%; -15.5%
- Permits: -22.8%; -5.4%
- Hours: -1.5%; -4.9%
- Earnings: 0.9%; -4.7%
About the Index: The Index is composed of five components: the Economic Cycle Research Institute (ECRI)’s Weekly Leading Index (http://www.businesscycle.com/resources/), North Carolina initial claims for unemployment benefits, North Carolina building permits, average weekly hours of work of all North Carolina employees in manufacturing, and average weekly earnings of all North Carolina employees in manufacturing. All data are seasonally-adjusted and modified for differences in prices levels where appropriate. Data are from the U.S. Bureau of Labor Statistics, the U.S. Census Bureau, and ECRI, whose permission to use their Weekly Leading Index is greatly appreciated. All calculations are done by Dr. Michael Walden.
Comments should be directed to Dr. Michael Walden at firstname.lastname@example.org.