By Jim Cline
The March 2013 report of the Washington State Economic and Revenue Forecast Council identifies the continued mixed economic signals from both the National and State economy. The key findings of the Council for the National economy included:
- The national economy continues to move forward at a modest pace. The economy’s fundamentals continue to improve and private-sector growth has firmed. There remain several headwinds that could push the U.S. back into recession.
- Federal fiscal policy remains at the forefront of economic uncertainty. On March 1, 2013, automatic sequester spending cuts kicked, potentially leading to $1.2 trillion in spending reductions over nine years.
- The sovereign debt crisis in Europe remains a significant threat to the U.S. economy. If this leads to a financial crisis, the U.S. economy could enter a new recession as well. Slowing Asian economies and threats to world oil supplies also pose risks to the U.S. economic recovery.
- The U.S. economy grew at a dismal 0.4% annualized rate (SAAR) in the fourth quarter of 2012. However, payroll employment has picked up and continues to chip away at unemployment.
- Consumer attitudes appear to be firming after the latest setback caused by fiscal policy missteps. Consumer spending remains subdued.
- The housing sector has continued to show further signs of improvement. Housing starts have strengthened, boosted by low inventory. Home prices continue to appreciate, which is critical for the recovery in housing.
- The manufacturing sector, which had been a bright spot in the recovery, has lost momentum. While this sector is not dragging down the recovery, it is no longer substantially adding to growth either.
- The housing sector remains the most significant upside risk.
The Report was more updated in terms of the State economy and describes a Washington economy that is somewhat stronger than the National economy:
- As expected in November, the Washington economy continues to expand at a moderate pace.
- Washington employment growth is on target.
- Washington disposable income is lower due to the “Fiscal Cliff” deal and sequestration.
- Washington housing construction is recovering faster than expected in November.
- Home prices are rising.
- Except for transportation equipment, Washington exports have weakened.
- Inflation in the Seattle area has slowed.
- We expect the Washington economy to continue to outperform the U.S. economy by a narrow margin.
The Council predicts Seattle CPI will continue near 2% throughout the duration of its forecast period, 2017. This Council inflation projection also anticipates an All Cities index slightly lower than 2%. While the differences in the projections are small, (about .2%), this is consistent with our previous statements that the Seattle CPI may slightly outrun the All Cities index in the near to intermediate term.
