KNOXVILLE, Tenn. — The outlook for economic growth in the Southeast remains bright unless inflation and higher interest rates cause consumers to retrench, a University of Tennessee economist said Wednesday.
“The (six-state) region has done well in recent years, and we expect that trend to continue throughout this year,” said Dr. Matt Murray, one of 10 economists recruited by the Wall Street Journal to peek into the near-future.
The panel generally counts on the Atlanta Olympics and tourism to produce a financial “boom that will make the memory of last fall’s slowdown do a fast fade,” the newspaper said.
“That makes it crucial for the Atlanta-based Olympics to be a huge success, have some spillover for neighboring states and give the Southeast more momentum as an international hub,” the paper said.
Murray, however, cautions that inflation and higher interest rates prompting debt-laden consumers to slow their spending could make the region’s growth picture “pretty dismal.” Inflation nationwide does not appear to be out of control, he said.
The states covered by the Wall Street Journal survey are Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee.
Looking specifically at Tennessee’s economy, Murray said population growth and the creation of new jobs are big pluses. One factor that concerns him is a drop in the growth of the state’s sales tax collections.
“We’re continuing to produce more (tax) revenues than we did last year,” Murray said. “We’d like to rise above that 3 to 5 percent range in annual revenue growth. Only time will tell if that’s the case.”
The lagging growth in sales tax collections is hard to explain in the face of a state economy that is growing, Murray said.
“The decline in (Tennessee) tax collections results partly because of job losses in textiles, apparel and leather manufacturing, which more than offset gains in the durable sector, including automobiles, machinery and metals,” Murray told the Wall Street Journal.
“On the bright side, Tennessee’s farmers should reap third-quarter benefits from the problems of their Midwestern counterparts, whose crops have been devastated by rain and drought,” Murray said.
“As weather woes have driven up grain and other commodity prices, farmers in Middle and Western Tennessee will realize better returns on corn, soybeans and other crops,” he said.
“Meanwhile, Nashville is completing a multipurpose ar ena that may be open for concerts and conventions by the end of the third quarter. That, in the wake of an expansion by Opryland and with two new hotels coming soon nearby, gives the city some glitter in advance of the proposed relocation of the National Football League’s Houston Oilers.”
Contact: Matt Murray (423-974-5441)