As economic expansion nears a decade, the potential for a recession is building, she says.
Florida’s economy remains strong as 2019 begins but with much uncertainty on the national level, state lawmakers were warned last week to prepare for the possibility of recession.
“There is a lot of volatility right now, a lot of global issues right now and some national headwinds coming,” said Amy Baker, coordinator of the Florida Legislature Office of Economic and Demographic Research.
“That is something to bear in the back of your minds as you develop the budget for the next go-around,” Baker said last week in a presentation to the Florida House Appropriations Committee.
The economic expansion will be 10 years old in June, she said.
“It is a very long expansion and we know it’s reaching its mature stage and the late stage of that expansion,” she said.
“That tells us we need to start watching what’s happening and thinking about what’s happening in the future.”
Baker said Florida’s economy may be affected by factors “largely that had nothing to do with Florida.”
They include fading stimulus from the federal income tax cuts that took effect a year ago, the impact of tariffs and a tighter monetary policy by the Federal Reserve Board.
Florida’s economic metrics are mostly good, Baker said, but residential construction activity is lagging.
“It has been weak, at least (compared to) what we’re used to, coming off the Great Recession,” she said.
“But, the supersize strength that we’ve seen in tourism has compensated for it.”
The reliance on tourism for the state economy makes Florida vulnerable to a national or global downturn.
“Tourism is such a strong part of our economy right now that anything that happens that weakens it is problematic for us,” Baker said.
Her office’s report on the financial outlook cited data from Moody’s Analytics that projected the possibility of a national recession in the next 12 months between 20 percent and 43 percent.
It also said a survey at a Yale CEO Summit found almost half of business leaders expect a recession by the end of 2019 and a poll of chief financial officers at a Duke University conference also found half expect a recession this year, with 82 percent expecting one by the end of 2020.
“We’re in the middle of a very fluid, very volatile time,” Baker said.
Although there are risks in the economy this year, consumers in the state are feeling more confident, according to a monthly University of Florida survey released last week.
UF’s Bureau of Economic and Business Research said its Florida Consumer Sentiment Index rose 3.1 points in December to 98.1, reversing four consecutive months of decline.
“Overall, Floridians are more optimistic this month. Looking ahead to 2019, the gains in consumers’ future expectations about the economy are very positive signs,” Hector Sandoval, director of the bureau’s economic analysis program, said in a news release.
All of the components of the index rose in December, including opinions of consumers’ personal finances.
The index of expectations of U.S. economic conditions over the next year rose 1.9 points to 93.8 and the index of expectations for the U.S. economy over the next five years rose 2.6 points to 92.8.
“Despite the recent volatility in the stock market and the partial government shutdown, the year is ending with an overall positive economic outlook and high level of consumer confidence among Floridians,” Sandoval said.
“Looking forward, we expect consumer sentiment in January to remain around the observed average of 2018.”