The local economy is on the rise, and leading indices that measure the "economic heartbeat" for Bryan, Chatham and Effingham County have increased, according to the recently released Armstrong Atlantic State University’s Center for Regional Analysis Economic Monitor’s second quarter report for May through July.
The three counties make up Savannah’s Metropolitan Statistical Area (MSA), and the Economic Monitor is responsible for presenting three quarterly reports each year for the MSA. The reports illustrate economic trends and short-term economic forecasts for the region’s economic activity for the next six to nine months, said a press release from AASU’s Center for Regional Analysis on Aug. 21.
"A lot of the data I get is aggregated for the three counties," said Dr. Michael Toma, director of AASU’s Center for Regional Analysis, who creates the Economic Monitor.
To compile the information, Toma analyzes economic data from the U.S. Census Bureau, the Bureau of Labor Statistics, the City of Savannah, Georgia Power, and the three counties. The economic indicators used for analysis help give a continuously updated idea of the MSA economy.
"The coincident index measures the current economic heartbeat of the region. The leading index is designed to provide a short term forecast of the region’s economic activity," the press release said.
"The forecasting index is sending encouraging signals about improving economic conditions by year-end, but given recent instability in the leading index, regional economic activity is expected to be somewhat choppy for the next three to six months," Toma explained in the release.
The coincident economic index has increased at an annualized rate of 2.9 percent, the Economic Monitor report said. From this year’s first quarter to second, the coincident economic index increased by 0.7 percent, from to 158.2 from 157.0.
"The (coincident economic index) was supported primarily by growth in seasonally-adjusted employment and electricity sales. Modest growth in hotel sales activity, boardings at the airport, and the U.S. coincident index also contributed to the increase," the report said.
Employment growth picked up during the second quarter, with regional employers adding almost 1,200 workers. According to the Economic Monitor, total employment in the MSA is currently 159,700.
In general, the report said tourism activity remains strong for the region, but the pace of growth did slow down during the second quarter.
"The annual rate of growth in room sales has declined by more than one-half during the past nine months. The seasonally-adjusted number of riders on tour buses and trolleys in downtown Savannah declined for the second consecutive quarter, yet it remains 3.5 percent higher than year-ago levels," the report said.
The report also noted the slowdown was likely a "delayed result of relatively weak economic activity in Georgia and the U.S. in the first quarter of the year."
The leading economic index increased by 1.4 percent during the second quarter, rising from 148.6 to 150.7.
The Economic Monitor attributed a "flatness" in the region’s housing market activities and a decrease in consumer confidence as reasons for why the leading economic index did not increasing further than 1.4 percent.
"Housing market indicators have been trending relatively flat for several quarters, thus suggesting that the sector continues to muddle along in what appears to be the cyclical low point in the housing market," the report said.
Despite the housing and credit market problems, the report said the Federal Reserve will most likely maintain the federal funds rate at 5.25 percent.
"The federal funds rate is the rate that the Federal Reserve typically adjusts to influence economic activity," Toma said Monday.
There’s an interest rate in the marketplace that banks charge each other for borrowing money from one another in order to meet their monetary quotas, he explained.
"A lot of banks will link their lending interest rates to the federal fund rates. The prime rate is what banks charge their customers," Toma said, noting this rate is always something slightly higher than what the Federal Reserve sets as the federal funds rate. Toma said the 5.25 percent has been holding for the past six months.
"The thinking right now is that they’ll keep it where it is, or possibly they might push it down," Toma said. He noted the possibility is a small one, but still exists.
"The Federal Reserve did just recently reduce its discount rate, which is what the Federal Reserve System charges banks to borrow money directly from them," he said. He said that because most banks would rather borrow from each other rather than the Federal Reserve directly, the reduction was more of a "symbolic act" to calm the economic disquiet over the summer’s stock market falls.
Both regionally and nationwide, economic activity did well in the second quarter, according to the report. U.S. economic activity grew at an annualized rate of 3.4 percent during the second quarter, the report said.
"Overall, the increase in the leading index sends an encouraging signal about economic activity in the Coastal Empire toward the end of the year. However, given the recent declines in the immediate past quarters, expect mixed economic activity into the fall, with the potential for more substantial improvement in late 2007 and early 2008," the report concluded.
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