EconSouth (Fourth Quarter 2006)
Southeastern Economy to Grow Modestly in 2007
Just as housing and energy concerns could dampen national economic growth in 2007, these issues are likely to have a similar effect in the Southeast. Regionally, the economic slowdown will probably be most pronounced in Florida because of the state's high concentration of housing-related employment.
Nationally, home construction and sales have been important drivers of economic growth in recent years, but some areas are seeing housing activity shift into a lower gear. So far, declines have been most prevalent in markets where speculation helped drive prices and supply significantly higher. Fortunately, most of the Southeast appears to be at relatively low risk of experiencing a major housing downturn.
In coastal Louisiana and Mississippi, the main problem will remain the shortage of housing caused by the 2005 hurricanes. However, sharply higher insurance costs, which are a drag on housing demand, will continue to confront Florida and other coastal areas of the Southeast in 2007.
A decline in housing demand affects more than just home construction. It also affects housing-related manufacturing industries concentrated in the Southeast. These industries include lumber, wallboard, furniture, home appliances, and flooring. A further pullback in home construction in the United States in 2007 would negatively affect these manufacturers.
Car production driving changes
The rapidly changing face of U.S. auto production will continue to affect the region. Ford Motor Co.'s plant in Hapeville, Ga., closed in fall 2006, and the General Motors plant in Doraville, Ga., has begun the shuttering process. These closings will result in several thousand job losses at both the assembly plants and their parts suppliers.
However, Korean automaker Kia Motors began constructing its first U.S. assembly plant in West Point, Ga., in 2006, and foreign-owned auto manufacturers continued to expand their presence in Alabama.
Reconstruction, energy build momentum
The economies of Mississippi and Louisiana will continue to benefit from Gulf Coast reconstruction efforts (see Q&A for a discussion of the long-term rebuilding plan).
Also, energy will remain an important factor in the region's economic performance. The prospect of relatively high oil and gas prices over the longer term has intensified exploration activities in the Gulf of Mexico. This exploration will provide an additional economic boost in 2007 and has already yielded benefits: A successful test well at a deepwater field 270 miles southwest of New Orleans indicated that the area may hold between 3 billion and 15 billion barrels of oil—increasing proven U.S. reserves by 50 percent if the higher estimate holds.
How the Southeastern states cope with the changes their economies are experiencing will determine how the region fares in 2007. The following profiles discuss economic conditions in each state during 2006 and what the future might hold.
|Agriculture Sector Weathers Challenges|
The Southeast's top agriculture industries delivered mixed performances in 2006. Following the ongoing recovery from 2005's hurricanes, most sectors hope to regain some normalcy in 2007.
Poultry rules the roost
Greenhouses, nurseries held their own
Livestock harnessed by uncertainty
Cotton market rides global demand
Citrus gets squeezed