Regional Update (October-December 1996)
Regional Update (October-December 1996)
|Index||Southeastern economic indicators|
Florida's Pace to Slow but Remain Strong
|Florida's Pace to Slow
But Remain Strong
Since the beginning of economic recovery in the early 1990s, Florida has consistently outperformed the nation. Stringing together five above-average years of growth is an impressive feat. Easing in 1997, to a pace more in line with the nation, appears in store. A large and strong service sector, powered by in-migration and tourism generated by a good national economy, along with healthy construction, should more than offset some manufacturing weaknesses in the coming year.
Services still look strong
mployment growth in Florida's important service industries (more than 35 percent of the state's nonfarm workers are employed in services) was strong this year. Though down from its peak in the first quarter of 1995, it rose nearly 4.1 percent between the third quarter of 1995 and the third quarter of 1996. Business service growth, including computer services and temporary agencies, was particularly robust, increasing 9 percent over the period.
Amusement, recreation, and lodging services also posted strong growth, 5.7 percent during the period, thanks mostly to new and expanded tourist attractions. Health service employment grew 3.3 percent over the year. As the economy slows a tapering off in the growth of temporary services may occur as businesses require fewer workers. The amusement and recreation industries may also experience some slowing if consumers become more reluctant to spend freely. The large health service industry, however, will maintain a moderate growth rate due to the continually increasing number of retirees moving in from other states, and that should bolster the other service industries.
The tourism industry anticipates reports of a possible record year for central Florida in 1996. New attractions, airline fare wars, expanded air services, and strong international traffic resulted in filled theme parks and high hotel occupancy ratesdespite 1,400 more hotel rooms in the metro-Orlando area. The strong showing is expected to last into 1997 as additional new attractions come on-line and Disney World celebrates its highly promoted 25th anniversary.
The hurricane damage rebuilding on the Florida Panhandle has been completed and the outlook for tourism in the new year is bright. Resorts on Florida's Gulf Coast and in south Florida report strong winter bookings and expect that the trend will carry over well into 1997.
Renovations to hotels and resorts in south Florida and Miami's trendy South Beach area are sure to further boost tourism. In addition, south Florida airports are undergoing billion-dollar improvement projects to accommodate the steadily increasing tourist traffic. For the first six months of 1996, 4.9 million visitors were recorded in the Miami area, a 4.2 percent increase over 1995. Nearly half of these tourists were international visitors, with South America the fastest growing foreign market. These trends are set to continue in 1997.
On a less positive note, in spite of improving performance in the cruise industry, there is still concern that the addition of new cruise vessels could result in overcapacity.
Manufacturing shrinking; foreign trade flourishing
Florida's manufacturing sector continues to shrink as a share of the state's total nonfarm employment. The pattern most likely will continue as companies downsize due to the changing market conditions. Between the third quarter of 1995 and the third quarter of 1996, Florida's factory payrolls decreased by 0.6 percent, after shrinking both in 1994 and 1995. Currently, only 7.8 percent of Florida's nonfarm workers work in factories (nearly half the Southeast's average of 14 percent). And about 60 percent of these factory workers are employed in durable goods industries such as electronic equipment, industrial machinery, or transportation equipment.
The outlook for the durables sector is based largely on U.S. Department of Defense contracts, as many large defense contractors have facilities in the state. Some of these Florida-based contractors, however, are retooling away from weapons to less volatile and more consumer-oriented products. Also, budget restraints on NASA should continue to negatively impact the "Space Coast" and the myriad of Florida suppliers to the space program.
Although the industrial base in Florida is relatively small, foreign trade is an important part of the state's economy. And durable goods shipments are a driving force behind the recent surge in exports. In 1995, exports of industrial machinery and computers, electrical and electronic equipment, and scientific measurement instruments posted double-digit gains and accounted for nearly 50 percent of the District's total shipments abroad.
Overall, Florida exports to the Association of Southeast Asian Nations (ASEAN) and Latin America, the state's fastest growing markets, are increasing rapidly. The economic turnarounds and privatization drives in many Latin economies have helped create a veritable boom for exporters of business services, including travel, telecommunications, and information processing services.
For 1997 the Florida trade outlook appears healthy. In addition, current trends toward the lowering of trade barriers with Latin America and other less developed countries should generally favor a number of U.S. industries, particularly some in Florida.
The new single-family housing market improved this year after the fall in housing permits seen in 1995. Both single-family construction and existing home sales growth followed a similar trend; however, existing home sales began the year stronger. Statewide housing permit growth rebounded somewhat during the second quarter but slowed to a 4.8 percent pace in the third quarter (measured year-over-year), nevertheless exceeding the region's growth rate of 2.6 percent.
In Miami, permit levels ended 1995 on an extremely strong note, reaching their highest point in this expansion. However, permit levels dropped significantly in 1996. Conversely, nearby Fort Lauderdale experienced strong upward growth all year after seeing declines throughout 1995. Both Orlando and Jacksonville followed the state trend, exceeding year-ago levels with a slight rebound during the second quarter. Florida's single-family construction and sales should experience moderate growth rates in 1997, fueled particularly by continued in-migration.
Multifamily construction remained healthy during 1996 although activity was slightly down from 1995 levels. Occupancy rates remain extremely high throughout much of the state. In terms of 1996 growth rates, Jacksonville will be the only major city to exceed 1995 levelsMiami, Orlando, and Tampa will not. The multifamily market in Florida should remain healthy during 1997 although construction will ease slightly once again.
Commercial construction continued to grow at a moderate pace during 1996. The industrial real estate market in Florida is particularly strong, with vacancy rates in the single digits. Jacksonville, in particular, is an extremely tight market with a vacancy rate of 3 percent recorded in the second quarter of this year. With this lack of available space, the industrial market should continue to perform well during 1997.
Office markets are also experiencing a decline in vacancy rates statewide. Suburban areas continue to post the lowest vacancy rates, but downtown areas are improving as older buildings go through the renovation process. Additional construction is expected in Florida's office markets but mainly in suburban areas. Orlando is the main exception because its downtown market is among the strongest in the nation. The retail market looks set to continue to perform well in 1997.
Overall, retail growth was healthy during 1996 and generally outpaced the nation. During the first quarter retail sales experienced brisk growth but slowed in the spring as durable sales eased year-on-year and nondurable products maintained a healthy growth rate. In the third quarter retail sales growth again rebounded as durable sales rallied. Retail sales during 1997 should maintain the current trend of moderate growth, especially as tourists provide some strength, but durable sales will likely weaken. Overall, Florida sales growth should continue to outpace the nation's next year.
Agriculture faces mixed prospects
Florida's orange production was a robust 203.2 million boxes in the 1995-96 season (the third largest on record) but was down about 1 percent from the previous year's level of 205.5 million boxes. Forecasts for 1996-97 expect production to rise to 220 million boxes.
Florida's sugarcane acres harvested rose 3,000 over last year's harvest, to about 440,000 acres. However, average yields this year were at 34 tons, down 0.6 ton from last year. This drop was enough to cause 1996 production to fall about 1 percent to 14.96 million tons, but a return to better yields should make 1997 a somewhat improved year.