By David Pendered
Some economic indicators just don’t make sense and that adds to the uncertainty of forecasting this phase of the economy, a leading Atlanta economist said Thursday.
Rajeev Dhawan, of the Economic Forecasting Center at Georgia State University, wondered, for example, how the construction industry could have added jobs in the first three months of the year, when the region was paralyzed by two ice storms.
“Construction was so strong in February; that is a mystery to me,” Dhawan said, before concluding that he is “gingerly betting on growth” in the regional and state economy.
In another example, one problem Dhawan identified in the talk about a recovery in the construction industry is the lack of institutional investors to finance the many projects that have been announced in the Atlanta region.
“Where is the financing? There is no word of financing; these are projects,” Dhawan said. “These towers are done by private equity, not by banks. … I’m not seeing too much about new malls and new hotels. I’m not hearing any buzz.”
Dhawan highlighted another anomaly by focusing attention on automobile purchases as an indicator of consumer behavior, rather than household income or other signs of purchasing power.
Dhawan noted that people will continue to buy vehicles almost in spite of their ability to afford the vehicles. Wages and jobs certainly aren’t increasing at a rate that supports such a major purchase, Dhawan said.
The reason sales will not abate? The deals from Toyoto and a few other manufacturers are too good to turn down, and the companies can offer the deals because they are using their home country’s depreciated currencies to offer irresistable deals to U.S. consumers.
The only blip in vehicle purchases in Dhawan’s model will occur at the end of this year. Even that slight downturn in projected car sales won’t last long, at least not once consumers realize that the Federal Reserve really won’t raise interest rates in the foreseeable future, according to Dhawan’s forecast.
“It’s all about the deals right now, and those deals will continue to be there,” Dhawan said.
Dhawan’s comments capped a morning-long session that dug into a series of financial and fiscal topics.
The morning began with a salute to Fenwick Huss, who has served as dean of the J. Mack Robinson College of Business since 2004.
Huss is leaving GSU to become the Willem Kooyker dean of the Zicklin School of Business at Baruch College. Baruch is a senior college in the City University of New York system.
The other presenters included Conrad Ciccotello, a GSU associate professor who discussed the economy of the millennials; Karsen Jeske, a vice president with Mellon Capital Management; and Mike Alexander, the research manager at the Atlanta Regional Commission.