Inflation up, local economic outlook still favorable

More worries about the economy Tuesday with word that the inflation rate in 2007 jumped to its highest level in 17 years. Consumer prices rose 4.1 percent last year, up from a 2.5 percent increase in 2006. 

In Savannah, the area's top business leaders met to hear the "2008 Forecast and Economic Trends" at an annual luncheon.

The overall message - the Savannah area has some slow down, specifically in the area of housing, but folks here are still seem better off than those in others parts of Georgia. 

Robert Sumichrast, dean of Terry College of Business at the University of Georgia is forecasting some continued growth for Georgia in 2008, but at the same time says the risk of recession statewide has increased to about 45 percent.  "People are worried about their jobs, they're worried about whether or not they can make the mortgage payment or their credit card payment.They're worried about health care," Sumicrast says.  "But Georgia is better off than the nation as a whole as we move into 2008.  And Savannah is better off than most of Georgia.  So, this is a good place to be."

Most say there are some reasons for optimism in 2008, but also reason for a sober, reality check.  In the area of housing, the president of the Savannah Multi-List Corporation (for 2007) reported a 25 percent drop in sales of single family homes in Chatham, Bryan And Effingham Counties.  New home construction is also down.  It's projected the number of permits for new homes declined 16 percent in 2007 compared to 2006.

However, Michael Toma, Associate Professor of Economics at Armstrong Atlantic State University says the job market is healthy.  He says the overall health of the manufacturing sector is good, that  in 2007, there was a gain of almost 5 percent in the number of jobs.  He says Gulf Stream is adding up to 1,100 workers and that JCB also announced plants to expand its Pooler facility and hire more than 200 additional workers.  "One way to describe what's happened in the last several years with respect to manufacturing is to think about getting on your skis and going down the slope," Toma told me.  "And you're going down at a relatively fast pace (the manufacturing sector bled off a lot of jobs over the last five or six years) and in the state and in the U.S you got to the bottom of the ski slope and things flattened out.  Now contrast that with Savannah - we went down the same ski slope but then we went over an Olympic style ski jump and we got catapulted back up here locally. So our manufacturing sector here in the region has outperformed the state and the rest of the U.S. In the last several years."  

Toma remains somewhat optimistic despite the national statistics, even on inflation.  "Certainly, that four percent is a concern, especially if your pay raise was only the three percent because you're essentially losing money," he says.  "But it's still nothing like the 12 or 13 percent inflation we had in the late 1970's."

Toma say he doesn't see the Savannah area economy as anywhere near a recession, but does say things will be a bit slower than normal.