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Posted on February 8, 2016 at 10:34 AM by Paige Worsham
February 2, 2016 Report
Good news! December 2015 collections, representing your distributions in February 2016, increased by 5.74% over the previous month. This is a reversal of the 6.18% decline experienced in November collections, and an increase of $12.7 million statewide.
December and January 2016
Nationally, the Bureau of Economic Analysis reports that in December both personal income and disposable personal income (income after taxes) increased 0.3 percent. Following the expected trend of slowing growth, the increase in wage and salary income was only about 1/3 of what we saw in November. Consumers seemed to feel this weakening as well, as the personal saving rate increased from 5.3% to 5.5% during the same period.
Unfortunately, the Federal Reserve Bank of Richmond’s monthly survey and analysis of business activity in the Carolinas continues to show limited expansion, using the term “tepid” to describe our economic growth in January. As a result, business capital spending in the Carolinas remained relatively unchanged or weakened, depending on the category of expenditure. The greatest declines came in the areas of equipment and software purchases. This reduction, combined with continued declines in U.S. exports, may prove challenging to some of our state’s manufacturers.
The regional survey also indicates that the slow rate of growth has started to impact employment. As you will recall, in previous months growth was driving wage pressure in some North Carolina metro areas. This pressure was especially acute in industries requiring a high level of skill and education. However, this month, “the survey’s measures of current labor demand, number of workers and average workweek, lost ground” (from December to January). There is some thought among economists that once international markets stabilize and recently developed inventories are exhausted, businesses will again feel more confident and ramp up operations and employment.
Looking forward six months into 2016, local business leaders are more optimistic on several fronts. As the graph below indicates, Carolina business leaders’ assessment of future activity continues to improve each month. For example, the general business outlook metric in the survey increased from 32 to 37 points between December and January.
The shift in expectations is even more dramatic when you look at individual indicators. For instance, while the indicator for general business conditions is currently at 1 (down from 3 in November), expectations for the future are at 37. As the chart below indicates, significant expansion is expected in the areas of business service expenditures, capital expenditures, and the number of employees needed.
Goldman Sachs’ chief economist sees the following national trends for the balance of 2016: slow but steady growth due to a strong U.S. dollar and a domestic economy that will “perform quite well” but not to the 2014-15 growth standards. He also sees 2016 as a solid year for consumers. Wages are expected to grow with increasing labor market pressure, and we are all expected to continue to enjoy the benefits of low gasoline prices. This should all assist with creating stable sales tax revenues for local governments. However, there could be significant variance in growth between counties, depending on the specific mix of employment, industries and educational attainment.