In 2012, we expect the economy to continue to grow at an improved but still subpar rate of 1.9%.
The burden of lost housing wealth that Florida’s consumers have to overcome is considerably higher than consumers in most states around the nation. Other burdens include persistently higher levels of unemployment and underemployment rates, and insufficient job creation to date. However, as 2012 gives way to 2013 and beyond, the economy will begin to grow more rapidly.
Real GDP growth in 2013 is expected to come in at 2.6% after which growth will accelerate to 2.9% in 2014 and 3.8% in 2015. Nominal Gross State Product is expected to reach nearly $915.8 billion in 2015, as Florida continues to progress toward becoming a trillion-dollar economy. The state will likely cross that threshold five years from now in 2017. Florida’s economy is one of the largest in the world and is expected to grow even larger in the years ahead as noted above.
P erso n a l I n c o m e , Retai l Sales, a n d Au to Sa l e s Personal income growth year-over-year decelerated in the second half of 2011 and into the first half of 2012 in Florida. It increased nearly 5.5% in the 1st quarter of 2011 and 5.0% in the 2nd quarter. The deceleration continued in the 2nd half of the year with growth of 4.4% and 4.1% in the 3rd and 4th quarters respectively. In the first half of 2012 growth appears to have stabilized at 3.2%. Looking forward, we expect that growth will accelerate and average 4.4% in the final half of 2012, for a full year average growth rate of 3.8%. In 2013 personal income growth will continue to accelerate and grow at 4.4%, then 5.0% in 2014 and 5.7% in 2015. Personal income growth in Florida lagged behind that of the nation as a whole during 2007-2011. In 2012, the positions were reversed and Florida outpaces the nation with personal income growth that is an average of 0.6% higher than the nation through 2015. Personal income will reach nearly $907 billion in 2015 - a year that will boast the highest growth since 2006.
Real disposable income growth, which also has been suppressed by the besieged economy, increased to just 1.4% in 2010, but this was the first growth since 2006. The growth rate eased in 2011 to 1.0%, but should see acceleration from here. In 2012, growth should come in at 1.9%, rise to 2.5% in 2013, 2.9% in 2014 and 3.7% in 2015. The stock market and bond market have made a strong recovery from the lows of the financial crisis, recovering aggregate financial wealth lost during the financial crisis. Sentiment has turned more bullish the past several years, but the stock market is still not fully back at the pre-recession, pre-crisis highs. The housing market nationally and in Florida has had no such run of luck, and housing prices still seem to be struggling to find a firm and solid bottom. Consumers have little choice when it comes to trying to rebuild their depleted home equity wealth other than to save more of their income and to try to put back together shattered nest eggs. This negative wealth effect will continue to dampen consumer spending in Florida and the U.S. Florida’s persistently high unemployment and underemployment will continue to weigh on consumer spending in Florida as well. As the labor market shifts into a mode where private sector job creation shows greater momentum, it will further help lift consumer confidence and spending. A consumer with a job is a consumer who is willing to spend more freely. New hiring and job security for the currently employed, however, will help to unleash even more of the pentup consumer spending that was postponed during the several years of layoffs and other cost cutting measures by businesses.
High and volatile oil and gasoline prices impacted Florida’s consumers and economy in 2011, and they continue to do so. Gasoline prices pulled back from the $4.00 a gallon mark, a level that, in the spring, many analysts believed would be penetrated this summer. But the decline in prices was partially reversed as soon as fear of military action in the Persian Gulf began once again to mount. Rising gasoline prices impact consumers like a tax that pulls money from their wallet (and thus other sectors of the economy), and into their Institute for Economic Competitiveness