Presiding consensus at the 2019 Business Forecast presented by the Center for Business & Economic Research, a part of Sam M. Walton College of Business at the University of Arkansas, was that the economy has slowed but should remain strong barring any unforeseen occurrences affecting the financial system. The forum occurred on Feb. 1 at the John Q Hammons Convention Center in Rogers, Ark. The various forecasters overwhelmingly predicted a cooling of what has been the longest stretch between recessions, other than the period between the early 1990s and the early 2000s. Yet, at the forum, the 2019 financial environment was predicted to remain relatively steady. Here are a few takeaways from the forecast.
Carolyn Evans, Head Economist and Senior Data Scientist at Intel Corporation, presented on the many factors contributing to the 2019 global economic outlook.
- “Global economic growth is projected to soften from a downwardly revised 3% in 2018 to 2.9% in 2019 amid rising downside risks to the outlook,” according to the World Bank’s Global Economic Prospects.
- “Growth has peaked amidst escalating risks,” according to the Organisation for Economic Co-operation and Development (OECD) Economic Outlook.
- The OECD forecasts world real GDP in 2019 to drop from 3.7% in 2018 to 3.5% in 2019.
- “The danger of a global economic downturn has risen, but the probability of a recession in 2019 is still low,” according to IHS Market. “After a brief spurt in 2017 and 2018, growth in the G7 economies is reverting to trend, and emerging markets are unlikely to come to the rescue.”
- IHS Markit projects that world real GDP to drop slightly from 3.2% in 2018 to 2.9% in 2019.
- The global business sentiment remains confident but confidence has dropped slightly in recent months, according to data collected by IHS Markit, Caixin, Eurostat and the National Federation of Independent Business (NFIB).
Ross DeVol, of the Walton Family Foundation, presented on the 2019 economic outlook, specifically as it relates to the U.S. market.
- The U.S. economy is currently experiencing its 100th month of expansion.
- Consumer confidence and spending remains high and, while real personal consumption growth has risen moderately, consumer confidence has grown significantly with more than a 1% increase, according to the Bureau of Economic Analysis and Conference Board.
- Home sales have begun to retreat as mortgage rates rise, according to the Census Bureau and National Association of Realtors.
- A notable year-over-year change is the increase in small business confidence, new core capital orders and business investments, according to the U.S. Census Bureau and the NFIB.
- The 2019 economic outlook summary includes a GDP percentage change from 2.9 in 2018 to 2.6 in 2019 and 1.2 in 2020 and a consumption drop from 2.7 in 2018 to 2.6 in 2019 and 1.0 in 2020. Business fixed investment is forecasted to drop from 5.5 in 2018 to 5.4 in 2019 and 2.1 in 2020.
While 2019 is expected to cool, a more drastic slowdown is forecasted for 2020, according to DeVol’s projections.
Mervin Jebaraj, Director of the Center for Business and Economic Research, presented on trends in the Arkansas economic landscape.
- Overall employment in Arkansas has experienced steady growth since 2010 and unemployment rates have dropped significantly from more than 9% in January 2011 to about 4% in July 2018, according to the Bureau of Labor Statistics.
- Northwest Arkansas employment numbers are strong but slower than last year. Fort Smith employment remains steady while Jonesboro employment is on a growth trajectory.
- Overall employment has seen starker increases in the metropolitan areas of the state and slower growth in rural areas.
- Predictably, unemployment has decreased with the higher employment rates. Unemployment rates have decreased in each major region of the state.
- Personal income in Arkansas has grown significantly since the 1970s but trails national averages by significant margins.
Impact on Regional Equipment Industry
Northwest Arkansas has seen about a 4% growth in employment in the construction sector, between December 2017 and December 2018. Little Rock experienced about a 3% decrease in employment in the “mining, logging and construction” sector but overall employment has grown significantly in the past decade.
Though home sales have begun to retreat nationally, it’s unclear how significantly this will impact the Louisiana, Oklahoma and Arkansas regions and there continues to be major manufacturing and development in these areas.
However in Oklahoma, economic growth is projected to reach a standstill in mid 2019 because of a decline in energy prices, according to the 2019 Economic Outlook, published by the Center for Applied Economic Research at Oklahoma State University.
“Because of the time lag between changes in energy prices and energy sector employment, benefits of the rise in oil prices in 2018 will accrue through the first quarter of 2019,” according to the report. “After which, the decline in energy prices in late 2018 and early 2019 will cause energy sector employment to decline. Along with slowing of the national economy, the reversal of growth in the energy sector will bring the Oklahoma economy to a standstill during the second half of 2019.”
After enduring a 28-month recession that cost Louisiana over 23,000 jobs, the state’s economy began growing in 2018, according to the 2019 Louisiana Economic Outlook published by the Economics and Policy Research Group at Louisiana State University. That industrial boom and a revived oil and gas industry should produce a recovery from the 2015-17 recession, with 2020 being particularly strong for the state. However the forecast is based on assumptions that the national economy will remain steady, inflation and interest rates will rise but remain unthreatening, oil prices will rise gradually and natural gas prices will decline slightly.
The state should surpass 2,000,000 jobs on an annual basis for the first time in its history in 2019, according to projections published in the report.
Steady employment nationally and regionally paired with consumer confidence is vitalizing, barring any unforeseen changes.