Florida growth rate to hit 2.6% in 2013
Florida’s economy should outpace national growth by 0.6 points in 2013, Beata Caranci, vice president and deputy chief economist of Toronto-based TD Bank Group told a group of business executives at the Citrus Club in Orlando Sept. 27.
That’s the good news.
The bad news is unresolved national tax and budget issues — which has become known as the fiscal cliff — is hanging over the state and national economy like the “cloud hovering above Charlie Brown,” Caranci told the group.
The fiscal cliff — the name given to the expiration of President George W. Bush-era tax cuts, payroll tax cuts, shifts in the alternative minimum tax, automatic across-the-board budget cuts known as sequestration and other tax issues — represent removing 5.1 percent of gross domestic product from the national economy.
And, regardless of what happens after the Nov. 6 election, preparing for the tax and budget issues will shave 1.5 points off national gross domestic product, Caranci said. The federal government is budgeting for the cuts, so some of those cuts will be put into place in the first quarter or two of 2013.
“It’s really tough to stop a moving train,” she said.
Beside the potential impact to economic growth, uncertainty over the tax and policy issues reduces business and consumer confidence and that will likely result in lower spending.
For 2013, Caranci predicted a 2 percent rise in gross domestic product nationally and 2.6 percent rise in Florida. That growth rate nationally will rise to 3.2 percent in 2014 and 3.9 percent for Florida.
Housing in Florida is also recovering, but it’s going to take a while to make a full recovery, she said. Orlando Regional Realtor Association reported a 5.1 percent rise in the median price of a home, but full recovery in the housing market will not occur until 2018 or 2019, Caranci predicted.
Restoring the wealth back into the housing market — which most middle-income Americans count on as their principal asset and not stocks, bonds and other securities — will spur spending by consumers.
For every $1 rise in property, consumers will likely spend 5 to 6 cents because consumers feel the home asset is their savings.
“When that asset is no longer perceived in the same way, behavior changes,” Caranci said.
The recovery in the housing market also will trigger a recovery in the commercial real estate market, particularly retail, Caranci said. However, that recovery will lag the housing market by about a year because it takes a growing number of consumers to increase spending and trigger a demand for more places to spend those dollars.
TD Bank Group operates TD Bank NA, which is Orlando’s 12th largest bank with 15 branches and $405 million in deposits.