Confidence improving in the region
My friends often ask me when things are going to get better. While I enjoy pretty much any discussion about the region, it's been difficult to explain that the economy is recovering despite persistently high unemployment and what has been an overall dearth of measurable confidence in what I hear from my friends and what we have heard from our business contacts throughout the Southeast. Just this past weekend, one of my friends shared that his business was picking up and he was feeling better about things. It's part of a larger theme we've been picking up on recently.
Atlanta Fed President Dennis Lockhart spoke earlier this week at Miami-Dade College. In this speech, "Functions of the Fed and the Current Economic Situation," he noted an increase in confidence throughout the region.
"Confidence appears to be growing. According to the Conference Board, consumer confidence rose sharply in January. Business confidence is also building. Business leaders remain cautious regarding investment and hiring, but in my contacts with businesspeople across a range of industries I hear more optimism than I heard even a few weeks ago. I believe that as businesses become more assured that growth will continue and their revenues will grow, they will increase investment and hiring."
As I noted above, throughout the economic recovery we detected an absence of confidence with regard to the outlook. We identified this uncertainty as an important headwind to a durable and sustainable recovery. Improving attitudes about the future could be an important, positive influence on the overall economic outlook.
In addition to economic intelligence President Lockhart gathers through the Bank's Regional Economic Information Network, we review what researchers at universities throughout the region are reporting. Recent reports from our Local Economic Analysis and Research Network (LEARN) seem to support what our network of business contacts is telling us.
Florida's January consumer confidence index showed an impressive increase in January. Dr. Chris McCarty, the survey director, writes that:
"Consumer confidence among Floridians soared in January up seven points to 77 from the revised December index of 70. ... The size of this increase in confidence among Floridians was not expected. Confidence among Floridians had been mired in the low 70s for the past few months, consistent with other economic indicators that characterize the Florida economy. This rise is unusual given the University of Michigan's preliminary reading for U.S. consumer sentiment which declined in January..."
Middle Tennessee State University's Office of Consumer Research reports on consumer confidence in the Middle Tennessee area. In their December publication, Dr. Timothy Graeff writes that:
"On the positive side, consumers feel slightly better about the current economy. The current situation index rose modestly to -90 from -93. The percent who said that business conditions in the country as a whole are 'good' gained only slightly to 7 from 5, but the percent who said that business conditions are 'bad' dropped to 34 from 41."
(As an aside and a plug for our friends at MTSU's Business & Economic Research Center, see their heat maps of Tennessee's employment picture. They also provide similar maps for major state metro areas, including Nashville.)
The University of Alabama's Center for Business and Economic Research recently released their first quarter 2011 Alabama Business Confidence Index (ABCI). Dr. Sam Addy, center director, discussed the latest reading during his presentation of the Alabama Outlook. The first quarter ABCI report notes that:
"Alabama business executives are generally feeling optimistic about prospects for the economy and for their industries as 2011 gets underway. The Alabama Business Confidence IndexTM (ABCI) rose 7.1 points to 55.0, indicating that the recovery will be on firm ground in the first quarter. ABCI is approaching its pre-recession reading of 56.8 recorded in the third quarter of 2007."
Mississippi's Business is a publication from the Mississippi Institutions of Higher Learning Department of Forecast and Analysis. They produce coincident and leading indicators for the state. In their latest report, Dr. Darrin Webb writes that:
"The Mississippi Index of Leading Indicators rose 1.2 percent to 97.5 in November. The index has risen for three consecutive months. The growth relative to the level six-months prior turned positive in November. The gain was small, but is a welcomed departure from five months of decline."
President Lockhart concluded his remarks in Miami by noting that while consumer and business confidence appears to be growing, he believes overstatement of the likely speed of improvement should be avoided:
"There are definitely hopeful signs of sustained recovery in 2011. That said, I believe it is a bit early to declare victory, and, to be sure, employment is nowhere near acceptable levels. Progress is real, but fitful, and support of accommodative Fed policy is still required, in my view. The appropriate outlook at this juncture is one of cautious optimism, avoiding overstatement of the likely speed of improvement."
I'm going to share these positive insights with my friend. While I'll note we're cautious when citing the improvement in confidence, I should also note that he is also the manager of my daughter's softball team. I think I may be able to parlay this into more playing time for my kid.
By Michael Chriszt
Assistant vice president in the Atlanta Fed research department
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