Economists: Business investments keep Charleston, nation upbeat

A marked increase in business investment in Charleston and the nation as a whole augers well for the continued growth of both economies, despite a slow down in auto sales in the fourth quarter of last year and a cooling of the housing market in some parts of the country.

That was the consensus of economists at the 15th annual Economic Outlook Conference hosted by the Charleston Metro Chamber of Commerce on Thursday.

Keynote speaker Ray Owens, senior economist with the Federal Reserve Bank in Richmond, Va., said while some economic indicators sharply declined last fall, in part due to the effects of Hurricane Katrina and in part due to the end of sales incentives offered by automobile manufacturers, they were more than offset by business investments that far out-performed predictions and grew by nearly 16%.

As a result, although the U.S. economy expanded at an annual pace of 1.7% in the fourth quarter of last year, the slowest pace in almost three years, the Federal Reserve expects growth to bounce back robustly in 2006, Owens said.

In fact, he predicted the economy will heat up so much that businesses and investors should expect another interest rate hike when the Fed meets in May. That will bring the Federal Reserve’s interest rate to 5% and will likely be the last rate increase for the foreseeable future, Owens said.

Like Owens, Al Parish, director of Charleston Southern University’s Center for Economic Forecasting, said business investment in Charleston is strong and getting stronger, but no local sector seems more vigorous right now than the Charleston real estate market.

“We’re been discovered; we’re not in a bubble,” Parish said.

“Construction of multifamily units will continue their strong growth, including apartment conversions,” Parish said. “Permits for nonresidential construction are also very strong, thanks to business investment. Given the recent activity of Vought Aircraft Industries and DaimlerChrysler in this area, we can expect this investment to continue as their suppliers begin to move into the region.”

He said 2005 saw a significant growth in retail sales and tourism in the Charleston region, growth that has continued through the first quarter of 2006.

“It’s really been unprecedented,” he said of the growth of the tourism sector this year.

Parish also predicted sustained growth of the Port of Charleston and an expansion of airline services at Charleston International Airport.

“We’re in an absolutely booming community,” he said. “We’re having the good kind of problems, such as growth management, congestion management and the like.”