GSU Forecaster: Economy Improving but Factors are Weighing Down Growth

May 22, 2013

A local economic forecaster says Georgia and Atlanta are seeing signs of recovery but several factors are keeping economic growth from accelerating this year.

Rajeev Dhawan is Director of Georgia State University’s Economic Forecasting Center. He says a greater number of housing permits and a reduction in home inventory have recently caused home prices to increase in the Atlanta metro area. Dhawan also says Georgia’s Job growth rate has been positive.

Rajeev Dahwan, Director of Georgia State University's Economic Forecasting Center, speaks during a May economic forecasting conference held at the university.
Credit Michelle Wirth/WABE News

“Overall number the last two quarters has been fabulous, better than the nation, leading the nation in growth rate in the last six months.”

But the expiration of the payroll tax cut coupled with ongoing caution is affecting consumer spending. Dhawan says consumers are buying more homes and cars but are not purchasing things such as furnishings and electronics. He says that’s evident in state sales tax revenue collections.  Those collections only grew by 0.4 percent in the last ten months of the current fiscal year.  That’s compared to more than 5 percent growth in the previous fiscal year.

“So that is telling me the consumer is still very frugal in that sense.”

And a slowdown in the global economy is affecting Georgia exports. Dhawan says the growth rate dropped significantly last year and didn’t pick up this year. He also says federal sequestration is affecting corporate morale. Dhawan believes all of those things will have effects on state and local companies.

“Things are getting better, there’s no doubt about it, but they’re not going to get better in a hurry because we are facing those headwinds. It’s like you’re flying in a plane, your engines are running, your pulling out the output, you’re flying, but the headwinds keep you a little bit slow.”

But Dhawan predicts things will pick up in the next two years. He says if the Global economy improves and Congress is able to reach a budget deal by the end of the year, it will lead to increased investment which will accelerate job growth.